From successful retail to... less retail

Quote from loogling:

garachen,

I am guessing that you want to become more institutional (less retail) for the possibility of a much higher profit, either through a drastic cost reduction or speed enhancement.

With 400K of commissions to IB, what was your average commission per share/contract back then? What is it now? A lot lower?

Is your higher speed helping you to execute more volume? Many percentage more?

Between fees and speed, which item would you say contributes more to your profitability? And, in the end, did your profit increase by a significant factor?

I'm a small retail trader, but always curious about the advantages and the thought process that the bigger players have. Just trying to understand the ecosystem and where I fit in the food chain.

PS: Do you feel like there are already too many people doing what you do?
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I don't want to give the exact number but when adding up IB clearing and execution fees my commission has dropped by 85%.

Exchange fees (by enrolling in day trading and market making programs) have dropped about 50%.

If I traded my current volume through IB, I'd be paying an extra $1.8 Million per year in total fees and commission.

The biggest effect is that it allows you to be more competitive on low risk, low profit strategies. Assume you have a ES strategy that is super good at getting 1 increment. Works 70% of the time. The rest of the time is split between scratch and a 1 increment loss. With the right fee structure this type of strategy will make you a lot of money. With a typical retail setup you will always be losing money from fees.

Then you need the speed in order to actually execute the strategy.

So yes, since the change my volume has gone from about 500 to 10,000 contracts a day. The cost savings from the original trading strategies were enough to finance the switch and then things got better with the addition of some low profit strategies.

And there are still some things that I'm not competitive in. Like Eurodollar futures. Firms that specialize in trading ED futures generally have a very expensive clearing membership - clear their own trades - and I believe their total cost per contract (all in) to be around 6c. That's crazy low!
 
Commission drastically lower, volume significantly increased. I guess your profit is probably 3-4 times higher now. You're a millionaire. Congratulation and good luck in 2012.
 
Quote from Trader KGB:

Curious to hear how this works out if you pursue it. IB has been dragging their feet on this for years. Huge window of opportunity they're blowing IMO...
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Having worked in a institution that tried to enter brazil's brokerage market before, I must say that probably is not IB's fault, brazil is a very closed for outsiders' market, it can take years to get a license alone, the locals and regulators will say they're friendly but they will make it a pain in every way they can.
 
Quote from velosoandre:

Having worked in a institution that tried to enter brazil's brokerage market before, I must say that probably is not IB's fault, brazil is a very closed for outsiders' market, it can take years to get a license alone, the locals and regulators will say they're friendly but they will make it a pain in every way they can.
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Yeah. I don't think it's IB's fault either. I had to fill out a big packet of paperwork from Brazil (in triplicate) that had lots of stamps and holographic seals on it. Then they open a Brazilian account for you and there are all sorts of weird tax issues bringing money into the country.
 
garachen,

"From successful retail to... less retail"
I feel like you can't really be categorized under retail, but perhaps you want to be a lot bigger to be called institution. By using the words "less retail", did some factors make you feel like you're still in retail? Or on the other hand, what is keeping you from feeling like you're an institution?

I noticed from your other posts that you had institutional experience. During that time, did you feel that the market is rigged against retail traders (not investors) in general? I guess we can leave out speed and commission since those are well-known items. I was wondering if you could list something else that would be of interest (i.e. using customers' order flow).

thanks again.
 
Quote from loogling:

garachen,

"From successful retail to... less retail"
I feel like you can't really be categorized under retail, but perhaps you want to be a lot bigger to be called institution. By using the words "less retail", did some factors make you feel like you're still in retail? Or on the other hand, what is keeping you from feeling like you're an institution?

I noticed from your other posts that you had institutional experience. During that time, did you feel that the market is rigged against retail traders (not investors) in general?
thanks again.
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There is a special place where clearing companies put 'less retail' clients. It's called PTG (Professional Traders Group). Apart from that, in my mind a retail customer also includes anyone who can't sign an ISDA.

Maybe if you are doing 100K futures a day or a few billion in bonds you could also qualify as non retail.

True sell side institutional is very different. It's about managing inventory and getting setup to anticipate what customers will want so you have the capacity to sell it to them.

I don't think the market is rigged in any way. Different groups have very different motivations for trading.

Of the 10Kish I do a day about 1/3 is automated.
 
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