FairX Announces New Futures Exchange for Retail Investors

[Specterx]

I'm really looking forward to this. It is a total game changer.

I understand the need for clearing fees and commissions but for CME to charge $125/month data fees for "pro" traders is ridiculous. And that is just for ES/NQ. Add $125/month for YM. Add $125/month for CL. So that's $375/month even if you don't put on a single trade, just to even look at the contracts in real time.

And this is per account. If you have 3 brokerage accounts that will be $1125/month. Shows the power of monopolies.

I think these new products will be a huge hit and surprised it took this long.

Problem is that futures exchanges benefit strongly from network effects, just like Facebook or Microsoft. It's very difficult for competition to overcome that, so ICE and CME are able to extract these gigantic monopoly rents and incredible 50-60% profit margins.

IMO exchanges to be regulated like the public utilities that they are.

 

[Sig]

Problem is that futures exchanges benefit strongly from network effects, just like Facebook or Microsoft. It's very difficult for competition to overcome that, so ICE and CME are able to extract these gigantic monopoly rents and incredible 50-60% profit margins.

IMO exchanges to be regulated like the public utilities that they are.

So the definition of what is a "public utility" never included network effects and that's no-where in anti-trust law. And those who actually understand how regulated utilities work would all agree that's it's both nonsensical and a horrible idea to rewrite laws to impose the model of granting a monopoly to a company outside the utility industry and provide them a regulated return. Heck we've spent the last 25 years working very hard to deregulate utilities! You don't want a world where anyone who has achieved network effects gets regulated as a public utility, talk about dystopian government overreach and massive unintended but entirely predictable consequences. Take it from someone who has run a company in the regulated utility space for the past decade.

 

[Specterx]

So the definition of what is a "public utility" never included network effects and that's no-where in anti-trust law. And those who actually understand how regulated utilities work would all agree that's it's both nonsensical and a horrible idea to rewrite laws to impose the model of granting a monopoly to a company outside the utility industry and provide them a regulated return. Heck we've spent the last 25 years working very hard to deregulate utilities! You don't want a world where anyone who has achieved network effects gets regulated as a public utility, talk about dystopian government overreach and massive unintended but entirely predictable consequences. Take it from someone who has run a company in the regulated utility space for the past decade.

If the law doesn't recognize network effects, that merely highlights how the law is outdated. What do you propose be done about this clear example of a rent-seeking oligopoly?

 

[Overnight]

"Problem is that futures exchanges benefit strongly from network effects, just like Facebook or Microsoft. It's very difficult for competition to overcome that, so ICE and CME are able to extract these gigantic monopoly rents and incredible 50-60% profit margins..."

So people complain about PFOF on the stock side, and complain about LACK of PFOF on the futures side.

All trading should just go away, because none of it is fair because of PFOF.

Dudes, you should be HAPPY AS CLAMS there are no dark pools in futures.

 

[Sig]

If the law doesn't recognize network effects, that merely highlights how the law is outdated. What do you propose be done about this clear example of a rent-seeking oligopoly?

First, do no harm. It's not always the case that doing something is better than doing nothing, Its not incumbent on the person correctly pointing out that an idea is worse than the status quo to come up with an idea better than the status quo or else their critique is moot.

I will admit that before I started working in the regulated utility space, I like 99% of Americans had no idea how it worked. I would highly recommend someone like you who is intelligent and intellectually curious to spend some time just learning the basics of granting a monopoly, regulated returns, rate cases, and the rest of what a regulated monopoly actually entails. If you're like me you'll probably be amazed at the complexity of this concept that's lived right under all our noses for so long without most of us even stopping to think about it.

As for what to do about it? At this point, nothing. Yeah, it sucks that exchanges can charge higher fees than they could if there were dozens of equally sized competitors. It, however, has close to zero impact on our economy or the vast majority of Americans. Telling every entrepreneur that they risk some legal or regulatory consequence if they manage to harness network effects? Massive consequences. The angel and VC industry goes away, for one, meaning now only big established companies can try anything new and risky. Seems the antithesis of what we're trying to accomplish? Every business is hobbled and has to purposely make their business less efficient for their customers and ensure they never reach any kind of position where the more customers they have the more valuable the service is to customers? We have to regulate thousands of companies from online multiplayer games to ride sharing companies to chip makers? Almost every company to come out of silicon valley over the past 50 years is now regulated? Massive bureaucracy just to determine who has run afoul of "network effects" much less regulate them? I could go on, but basically massive negative consequences felt by every American. And that's before we even start to talk about what exactly "regulating" entails.

There isn't a "cure" I know of for the anti-competitiveness of network effects that isn't far worse than the disease. Life's like that sometimes, we have to restrain ourselves from running off half cocked in the mistaken idea that we have to "do something" no matter how damaging that "something" ends up being.

 

[Specterx]

First, do no harm. It's not always the case that doing something is better than doing nothing, Its not incumbent on the person correctly pointing out that an idea is worse than the status quo to come up with an idea better than the status quo or else their critique is moot.

I will admit that before I started working in the regulated utility space, I like 99% of Americans had no idea how it worked. I would highly recommend someone like you who is intelligent and intellectually curious to spend some time just learning the basics of granting a monopoly, regulated returns, rate cases, and the rest of what a regulated monopoly actually entails. If you're like me you'll probably be amazed at the complexity of this concept that's lived right under all our noses for so long without most of us even stopping to think about it.

As for what to do about it? At this point, nothing. Yeah, it sucks that exchanges can charge higher fees than they could if there were dozens of equally sized competitors. It, however, has close to zero impact on our economy or the vast majority of Americans. Telling every entrepreneur that they risk some legal or regulatory consequence if they manage to harness network effects? Massive consequences. The angel and VC industry goes away, for one, meaning now only big established companies can try anything new and risky. Seems the antithesis of what we're trying to accomplish? Every business is hobbled and has to purposely make their business less efficient for their customers and ensure they never reach any kind of position where the more customers they have the more valuable the service is to customers? We have to regulate thousands of companies from online multiplayer games to ride sharing companies to chip makers? Almost every company to come out of silicon valley over the past 50 years is now regulated? Massive bureaucracy just to determine who has run afoul of "network effects" much less regulate them? I could go on, but basically massive negative consequences felt by every American. And that's before we even start to talk about what exactly "regulating" entails.

There isn't a "cure" I know of for the anti-competitiveness of network effects that isn't far worse than the disease. Life's like that sometimes, we have to restrain ourselves from running off half cocked in the mistaken idea that we have to "do something" no matter how damaging that "something" ends up being.

Your basic claim is that unfettered monopoly/oligopoly, wherein capitalists can set up a toll booth and earn massive windfall profits/rents out to infinity, is necessary for economic growth and tech innovation. This belief was rejected in law and economic theory over 100 years ago, and was indeed shown to be false by subsequent experience - both here and in other countries.

How exactly anti-trust laws need to be updated is a matter for debate - but that they need to be updated, isn't.

 

[Sig]

Your basic claim is that unfettered monopoly/oligopoly, wherein capitalists can set up a toll booth and earn massive windfall profits/rents out to infinity, is necessary for economic growth and tech innovation. This belief was rejected in law and economic theory over 100 years ago, and was indeed shown to be false by subsequent experience - both here and in other countries.

How exactly anti-trust laws need to be updated is a matter for debate - but that they need to be updated, isn't.

I think you're conflating antitrust laws and regulated utilities. Antitrust laws attempt to break up monopolies so they don't exist. The regulated utility model purposely grants a monopoly to one company (and actually prohibits other companies from competing with them even if they want to) which is then regulated by a utility commission to earn a regulated rate of return. Regulating as a utility is almost the opposite of what you want, believe me. Again, highly encourage you to do a deep dive into exactly how the regulated utility model works, I think you'd really enjoy it.

 

[SunTrader]

So you're (Sig) saying breaking them is worse than doing nothing and let the monopolies continue operating unimpeded?

AT&T, Standard Oil etc would almost certainty still exist in their previous mammoth size states if not for being broken up. No one was going to topple them in the marketplace.

 

[Sig]

So you're (Sig) saying breaking them is worse than doing nothing and let the monopolies continue operating unimpeded?

AT&T, Standard Oil etc would almost certainty still exist in their previous mammoth size states if not for being broken up. No one was going to topple them in the marketplace.

Again, you called for regulating them as a utility. Regulating a company as a utility requires you grant them an exclusive monopoly with a regulated return. That is not what you actually want.

It's important if you want to actually accomplish something rather than just rage against the machine that you think through what you're proposing. Not only is regulating exchanges (or anything else that's not actually a utility) as a utility a horrible idea and far worse than the status quo, but it actually flies in the face of what you believe and what you want to accomplish. And again, that's true no matter if one has a better idea or not.

I'm perplexed that you're being somewhat obtuse on this? I really think you would enjoy learning how regulated utilities work and it would make your ideas far more effective.

 

[SunTrader]

Again, you called for regulating them as a utility..

I asked if you think they should they be broken up, not regulated.