Bright trading and any thoughts

[Don Bright]

Quote from lescor:

Not going to comment on your rates Don, but just wanted to say thanks for talking the nyse and arca into paying us rebates. That's put thousands directly in my pocket.

(Not taking full credit for that), but kind of interesting how the exchanges thinks some times. The NYSE guy, and the ARCA guy fly out to meet with Bob and I to discuss the merger, the changes they were making and all the rest. Obviously we have always provided a lot of liquidity to the NYSE over the years. And, we find out that the changes they had in mind would have eliminated any need for us to leave any orders on the NYSE. They were literally shocked and asked us why. With NMS, why would be leave orders if we're not getting paid, but being charged for re-routing to ARCA and other ECN's? So we simply explained that when all the firms found out about this, that they would all stop posting on NYSE. Literally within one week they called to say that they had a vote to pay us a quarter on listed stocks.

Anyway, thanks...hope all works out for you Lescor!! Talked to some of your buddies.

Don

 

[drumbandit]

Quote from rwk:

Thanks for the clarification. My mistake -- trading via Bright last year would have doubled my commission expense.

That's not entirely accurate. It depends on the number of shares you traded and the distribution of shares. If you averaged 944.25 shares/trade last year you would've been trading at least 1000 shares on some trades and would get charged .004/share.

Let's say you traded exactly 70% of the time using 1000 shares and 30% of the time using 800. Average is 940 shares/trade. The average commission would be .7*.004+.3*.01 = .0058, hardly double IB's bundled rate.

Of course you could swing the other way and trade mostly under 1000 but then you would need to trade much more than 1000 on some trades to average 940. That doesn't make sense from a risk management standpoint unless you had some very high probability trades.

 

[Shreddog]

Quote from drumbandit:

That's not entirely accurate. It depends on the number of shares you traded and the distribution of shares. If you averaged 944.25 shares/trade last year you would've been trading at least 1000 shares on some trades and would get charged .004/share.

Let's say you traded exactly 70% of the time using 1000 shares and 30% of the time using 800. Average is 940 shares/trade. The average commission would be .7*.004+.3*.01 = .0058, hardly double IB's bundled rate.

Of course you could swing the other way and trade mostly under 1000 but then you would need to trade much more than 1000 on some trades to average 940. That doesn't make sense from a risk management standpoint unless you had some very high probability trades.

Think your math is a little flawed there my friend.

From where I sit you're paying .01 for 800 shrs and .01 for 1000 shrs. Sounds like double to me.

 

[lescor]

You can't compare apples to oranges. If you are comparing an unbundled rate from Bright you have to compare it to the unbundled rate from IB. That rate happens to be .35 cents per share to start but kicks down to .20 after only 300,000 shares in the month. And that is on every share traded. So Bright's rates are actually more than double IB's in most cases.

But IB won't show you their balance sheets, you have to decide for yourself what that's worth.

 

[Arnie]

Quote from Dobbes:

Can anyone run me through a calculation of how the commission rates work? Maybe do a sample trade, and show how much is taken out at 0.004 and 0.1?

I traded at Bright (LV) a few years ago. This is what I payed

up to 1000/shrs=.01 with .003 rebated at the end of the month for a net on .007

anything over first 1000=.004 so a trade of 1400 shrs would cost 1000x.01 and 400x.004

Example: I buy 2200 shrs AAPL. I pay .01 for 1000 and .004 for 1200. (remember, you get your rebate on the .01 at the end of the month).

Example: I buy 1000 shrs AAPL and immediately buy 1000 more. I pay .01 for all 2000 (with .003 rebated on all 2000 at EOM)The .004 only applied to anything over a 1000 on each trade.

PS. Bright is a stand up firm. I never worried about my money. You can get payed twice a week. They are very generous with leverage and they will let you trade the way you want. But, the best rates go to the guys with the most volume, as it should be.

 

[Don Bright]

Quote from lescor:

You can't compare apples to oranges. If you are comparing an unbundled rate from Bright you have to compare it to the unbundled rate from IB. That rate happens to be .35 cents per share to start but kicks down to .20 after only 300,000 shares in the month. And that is on every share traded. So Bright's rates are actually more than double IB's in most cases.

But IB won't show you their balance sheets, you have to decide for yourself what that's worth.

Don't forget use of capital, don't forget short stock interest, remember IB is still just a retail broker. I have always respected TimberHill, and IB and MBTRading are the only retail firms I have ever suggested to people. We have a family entity that may very well open an IB account.

Heck, trade 5000 shares at Scottrade for $7.00 ...what is that per share? I've never said we're the best for everyone, but we have solid traders at all ends of the share volume scale, and all ends of capital needs.

Anyway, we're here if you need us.

Quite a sell off in spoos after the close, can't seem to find out why...any thoughts from anyone? Did I miss something?

Don

 

[drumbandit]

Quote from Shreddog:

Think your math is a little flawed there my friend.

From where I sit you're paying .01 for 800 shrs and .01 for 1000 shrs. Sounds like double to me.

Ooops you're right, didn't take into account the first 1000 is strictly at .01. Scratch that post then.

 

[Shreddog]

Quote from Don Bright:

Don't forget use of capital, don't forget short stock interest, remember IB is still just a retail broker. I have always respected TimberHill, and IB and MBTRading are the only retail firms I have ever suggested to people. We have a family entity that may very well open an IB account.

Heck, trade 5000 shares at Scottrade for $7.00 ...what is that per share? I've never said we're the best for everyone, but we have solid traders at all ends of the share volume scale, and all ends of capital needs.

Anyway, we're here if you need us.

Quite a sell off in spoos after the close, can't seem to find out why...any thoughts from anyone? Did I miss something?

Don

ORCL

 

[lescor]

I agree 100% Don, it's not just about rates, I was just addressing a rate related question. The main advantage of prop is the leverage, and Bright provides that in abundance, which can be extremely valuable for capital intensive strategies.

I refer people to your firm on occasion, but have one nagging issue I can't understand, maybe you can explain. Why do you charge a penny per share for every share and rebate the rest at the end of the month? For high volume traders that can dramatically reduce the equity in their accounts until they get their rebate, which can really hike the cost of interest and haircut charges. Surely a firm the size of Bright's that has a powerhouse like Goldman as an ally can figure out a way to do the accounting at each trader's commission rate on a day to day basis?

If I come in as a 4 million share/month trader, by the halfway point my account is down $20,000 due to commissions, even though I am going to get a good chunk of that back. But if I only have a $50,000 account and hold a lot of overnight positions, my haircut is based on my now greatly reduced equity, which means I'm paying an artificially high haircut and interest rate. Not to mention the short term interest free loan I'm giving you. And if I'm having a flat month, my account is running on fumes by the end and I need my rebate check just to stay in business.

 

[Don Bright]

Quote from lescor:

I agree 100% Don, it's not just about rates, I was just addressing a rate related question. The main advantage of prop is the leverage, and Bright provides that in abundance, which can be extremely valuable for capital intensive strategies.

I refer people to your firm on occasion, but have one nagging issue I can't understand, maybe you can explain. Why do you charge a penny per share for every share and rebate the rest at the end of the month? For high volume traders that can dramatically reduce the equity in their accounts until they get their rebate, which can really hike the cost of interest and haircut charges. Surely a firm the size of Bright's that has a powerhouse like Goldman as an ally can figure out a way to do the accounting at each trader's commission rate on a day to day basis?

If I come in as a 4 million share/month trader, by the halfway point my account is down $20,000 due to commissions, even though I am going to get a good chunk of that back. But if I only have a $50,000 account and hold a lot of overnight positions, my haircut is based on my now greatly reduced equity, which means I'm paying an artificially high haircut and interest rate. Not to mention the short term interest free loan I'm giving you. And if I'm having a flat month, my account is running on fumes by the end and I need my rebate check just to stay in business.

Valid question. We have hundreds of traders on literally a hundred different pricing plans. Goldman will only bill us one rate, and we have to do all the individual calculations to determine proper rebate amounts for each person. It obviously has to be the highest number or it won't work. Nothing sinister on our part, just a big headache for us, accounting wise.

We understand your point about mid month account balance, etc. And, we calculate rebates when concerned about risk and amount of capital usage. If an account is flat, we check rebate amounts and account for them before we bother the trader. We are very clear with our traders on how this all works, and have only a few that it concerns from time to time.

Don