ETG+Schoney?

GetWhatUDeserve · Sep 8, 2005

Quote from mschey:

What you pay, and whether or not its a good deal is highly subjective, it's not black and white like some would lead you to believe. Technology is an edge and surely worth paying for, extra services are valuable and worth paying for, having tremendous buying power is a huge edge, more than any other. And that is worth paying for. Being at a solid firm is worth paying for. The ability to hold positions is another tremendous edge, and worth paying for. It's not all about getting the lowest rate folks, and I make, have made, and continue to make a tremendous amount of money trading.

Good trading!

Mike

One thing missing is that its very hard to quantify "good service" or "a solid firm. " It is very easy to quanify savings on .002 versus .008, right? Over thousands of trades, thats many hundred thousand dollars per year. That is what 99% of those reading this sentence right now DREAM of making. Think about it, a whole dream from a lower rate.

ONe thing about Buying Power, if you are good, you can use more and you will have a great rate. If you are new, you don't need the BP because it is risky compared to your equity, so go for the best rate you can. If you are at a firm where they give lots of BP to everyone and you are good, you are getting ripped off because you will sacrifice rate to cover the losses of other bad traders.

My first firm used to tell me that back in 1998 when I paid, guess what, .03 per share all in. WOW, thats a hoot! After a short discussion about "other firms," and their typical rant about "we are a solid firm, and you can't put a price on great service", my rate went down to .01, instantly. What does that tell you? It tells you that their cost to clear is about .002 or less, back then.

If your trading is so over leveraged that if the technology goes down for a couple of minutes every blue moon, and thats going to wreck your business, you are in over your head and should not be trading with that much risk. I have been trading for over 7 years and NEVER has that mattered to me, in the long run. An there is no firm that can guarantee 100% up time, no matter what they charge.

All that is important is adequate technology, adequate service, and decent accounting from a firm, for 99% of all traders. I know this is subjective, but I believe true. For example, clearing through Spear Leads vs. CCLS. Ive been there. Spear Leads, Penson, Etc are adequate in that it won't take you extra hours (opportunity costs) to work out the bad trades that are in your account tomorrow (that aren't yours) but with CCLS, you can have major headaches. It needs to be good enough, not poor and not perfect.

The only area you can really quantify is the rate, and see how it directly affects your trading business.

We now know what the clearing rate for a good firm is, from the news article on Schonfeld and ETG. I would use that as a bargaining point for everyone here, in all of your deals. I am so glad someone printed that. It kinda takes the air out of every firm that is trying to charge you a penny a share or even .005.

Newatthis · Sep 8, 2005

Quote from ratboy88:

it is much easier to bring in traders with no capital and fling crap on the wall and see what sticks than to have someone new bring in their own capital. the question is, how successful are these newbies??? are they turning over 20 traders to keep 3??? just because the seats are filled doesn't mean they are thriving. rumor has it they are a churn mill.

Could be a churn mill. Seems to me that you need to go through a lot of people to find the good ones. Typical in the trading business.

Trainees are only part of the office. There are many who put up their own money. Seems like taking the risk of a newbie and willingness to spend moeny on one is a sign that they are making money.

ratboy88 · Sep 8, 2005

Quote from Newatthis:

Could be a churn mill. Seems to me that you need to go through a lot of people to find the good ones. Typical in the trading business.

Trainees are only part of the office. There are many who put up their own money. Seems like taking the risk of a newbie and willingness to spend moeny on one is a sign that they are making money.

i can live with this assessment......to a point.

GetWhatUDeserve · Sep 8, 2005

Quote from mschey:

I have a fair rate, not the best, not the worst either. Like I said, you have to factor in everything to make a good decision. Technology, automation, BP, Pay out, Firm reliability, How the firm manages risk, services, etc. All of these factors are just as important, if not more important than your clearing rate, IMO.

And by far the greatest trump card is to have an edge. If you don't have that, even trading for free will put you out of the game.

Good trading to all!

Mike

So how does a firm explain to you the relationship between their higher rate and all of the factors you mention?

If its in their business plan that they need to charge you a higher rate because it costs them to provide those extras like "automation, BP, Payout, reliability, risk management, services," then they should be able to clearly tell you exactly what percentage of your higher rate goes to maintain each of those categories. If they cannot, then it either because they are taking the fat themselves or they are not a great business. In either case, you are better off trading through a firm that can clearly explain it.

MOST firms assume that MOST traders will lose money, so most firms are interested in making money off of them before it happens.

In most businesses, firms recognize how to do each of those things, automate or systemetize the process so it costs virtually nothing, and then compete in the marketplace by LOWERING THEIR RATE, compared to other firms.

mschey · Sep 8, 2005

Quote from GetWhatUDeserve:

So how does a firm explain to you the relationship between their higher rate and all of the factors you mention?

If its in their business plan that they need to charge you a higher rate because it costs them to provide those extras like "automation, BP, Payout, reliability, risk management, services," then they should be able to clearly tell you exactly what percentage of your higher rate goes to maintain each of those categories. If they cannot, then it either because they are taking the fat themselves or they are not a great business. In either case, you are better off trading through a firm that can clearly explain it.

MOST firms assume that MOST traders will lose money, so most firms are interested in making money off of them before it happens.

In most businesses, firms recognize how to do each of those things, automate or systemetize the process so it costs virtually nothing, and then compete in the marketplace by LOWERING THEIR RATE, compared to other firms.

In a capitalistic society it is ok to make money. It's called a profit. Although capitalism sounds selfish and greedy in theory, the fact remains, it works well in practice.

I hate to break the news to you, but a business doesn't need to explain their cost structure to you, how they make money, even what they intend to do with the money, or even how much money they make. That's their business and none of yours, is the way I see it.

May I suggest you really dig into how much money it costs to operate a business, you just don't seem to have a grasp, and my guess is that comes from not having any "real world" experience managing a business. Talk to any small business owner and it will truely enlighten you. There are very few businesses out there that can be operated without fixed costs, and its those costs that are the hardest to overcome. That is why businesses get to make a profit, because they take the risk.

This could go on, I have a busy evening planned, you may have the last word as I am retiring from this thread.

Good trading!

MIke

GetWhatUDeserve · Sep 9, 2005

My post wasn't an attack on you, although some might think you took it that way. While I agree with you, businesses do not have to share the "cost structure," any good firm should easily be able to tell you why they charge a higher rate than someone else. IF they don't, then either you are dealing with a low level employee, they just don't know (bad), or they refuse to tell you (bad).

To infer that I don't know business is merely conjecture, how could you possibly ascertain what I know about business. I could infer that you are a poor negotiator, because you yourself said you don't pay the best rate and you cannot explain exactly why your firm charges you a higher rate. But I won't do that, I don't do that sort of thing.

areyoukidding? · Sep 9, 2005

Quote from mschey:

In a capitalistic society it is ok to make money. It's called a profit. Although capitalism sounds selfish and greedy in theory, the fact remains, it works well in practice.

I hate to break the news to you, but a business doesn't need to explain their cost structure to you, how they make money, even what they intend to do with the money, or even how much money they make. That's their business and none of yours, is the way I see it.

May I suggest you really dig into how much money it costs to operate a business, you just don't seem to have a grasp, and my guess is that comes from not having any "real world" experience managing a business. Talk to any small business owner and it will truely enlighten you. There are very few businesses out there that can be operated without fixed costs, and its those costs that are the hardest to overcome. That is why businesses get to make a profit, because they take the risk.

This could go on, I have a busy evening planned, you may have the last word as I am retiring from this thread.

Good trading!

MIke

I agree with you, they make a profit and that is their right to do so. but, also caveat emptor applies here too.

ChaosNSX · Sep 9, 2005

He did explain the higher rate, BP, technology, firm health, client services, unrivaled professionalism, and other perks.. You really can't put a deep discount price on a good business relationship. Its the key to consistent growth and longevity in any business. Definetly an important aspect of trading no matter how independent the trader may think he wants to be. Most of the time, people use cost as the sole factor because they have no idea whats all available to them, or how they would use a valueadded service to strengthen their edge. So they rely on cost and so falsely assume all firms are the same.

So someone creates an offshore entity and give you .00000000001 a share, 10K down, unlimited leverage. You won't ever see the money you put down, and your probably being fed a simulation and never had any trades actually executed. THough through your reasoning none of this matters because the cost structure is right and the most competitive. How long do you think your will be in your trading business?

Are you starting to see the point mschey and I are trying to convey?

Why do people pay what seem absurd rates at Goldman? Same reason, resources, reliability, and relationships that sharpen the edge.

Where we go one we go all.

Quote from GetWhatUDeserve:

My post wasn't an attack on you, although some might think you took it that way. While I agree with you, businesses do not have to share the "cost structure," any good firm should easily be able to tell you why they charge a higher rate than someone else. IF they don't, then either you are dealing with a low level employee, they just don't know (bad), or they refuse to tell you (bad).

To infer that I don't know business is merely conjecture, how could you possibly ascertain what I know about business. I could infer that you are a poor negotiator, because you yourself said you don't pay the best rate and you cannot explain exactly why your firm charges you a higher rate. But I won't do that, I don't do that sort of thing.

Don Bright · Sep 9, 2005

Always good to see a lively discussion that I'm not directly involved in.....

Mike and I may disagree at times, but you'll never catch me saying that he doesn't know the business well. And the points about multiple cost factors/decision process, are well founded.

Now get back to trading....LOL

Don

GetWhatUDeserve · Sep 9, 2005

Quote from ChaosNSX:

So someone creates an offshore entity and give you .00000000001 a share, 10K down, unlimited leverage. You won't ever see the money you put down, and your probably being fed a simulation and never had any trades actually executed. THough through your reasoning none of this matters because the cost structure is right and the most competitive. How long do you think your will be in your trading business?

Well, first, as I remember, every trade has a number attached to it, that identifies it for clearing. So if you were "being fed a simulation" you would be able to tell pretty quickly if there was not actual trade. But I will give you credit for good use of hyperbole.

I see your points, and as you know we have spoken before directly regarding rates. But when it costs .0016 to clear, and you have guys paying .01, my opinion stands that the firm should have some easily quantifiable reasons for that delta. AT least, if you want to pay a penny a share, or more, you should know exactly why you do so. So many people are have the collective smoke blown up their asses on this one, and I am not saying you or your compadres, that they don't understand they can get adequate service for much less.

For example.....a guy mentioned to me once that he could clear me for .015 a shares, the benefit being that my orders can be handled by a floor broker. Well, I don't gain any value added by having my order go to the floor. I get filled just fine electronically.
So I would rather pay .005 and execute electronically.

My friend is one of the best CTAs in the country. 10% of his business is equities, and he pays .02 per share. He likes to phone his orders in, he won't trade electronically in futures cause his trades are so large. For him that is fine and he knows exactly why he pays those rates. He also likes the confirmation of a guy reading back the order.etc.

Each trader's business situation is different. For most daytraders, it is extremely important to have the lowest possible rates, I say that unequivocally. If you are in a fraud situation, like the one you mentioned with a "trading simulator" you can figure that out immediately.

And you can clear through Spear Leads for far less than .01, so I don't know where you got that Goldman has "absurd rates." You can clear through SLK (Goldman) for far less than .01, far less. A lot of it involves good negotiation.

Anyway, if you are happy with high rates and what you get for that, thats fine. Obviously you are making money and like the feeling you have that you are paying for all of those important things you mentioned.

I think the answer to this question is yes for almost everyone, except the insane. "If you could pay a lower rate, and get service that meets your business needs, than would you? Should you?"

I hope, at least, you answer that question with a resounding yes.