Futures Clearing firm pay interest?

[blueraincap]

Extra cash for counter party risk. With equity options, clearing firms have large deposits with the OCC for counter party risk. Your margin deposit is not enough to protect the system.

but wouldnt it make more sense to require the trader himself to post up the margin (ie increased margin requirement) instead of making the broker to pay up which cost will eventually end up in commission

 

[mmt]

have you ever seen any industry-wide estimate for average futures commission rate? Or out of your mind, what do you guess it is about? relative to notional amount traded, something like 0.3bps?

Advantage Futures advertises $0.07 per contract once you hit 10,000 contracts in a month. Wedbush is also very competitive. FC Stone, GH Financial, Phillip Capital, UOB also offer decent rates.

If you trade a conservative strategy without large overnight positions (relative to deposit) you can trade for $0.05 after generating about $20,000 in commissions (at a higher rate of say $0.25).

So, if you pay $0.10 and the notional value of a futures is $100,000, commission is 0.01bps. (It will be about 0.1bps with exchange fees).

 

[rmorse]

but wouldnt it make more sense to require the trader himself to post up the margin (ie increased margin requirement) instead of making the broker to pay up which cost will eventually end up in commission

No not really. They FCM is expected to take steps to reduce risk to the system. The best way to do that is have them make a financial commitment.

 

[blueraincap]

No not really. They FCM is expected to take steps to reduce risk to the system. The best way to do that is have them make a financial commitment.

thanks. didnt know that before. is there any summarised resource such as a detailed article or a book where I can learn about these uninteresting details about the futures industry? I predict the chinese market will present some interesting opportunities going forward.

 

[just21]

At Interactive Brokers the universal account is a securities and futures account rolled into one so you can be long dividend paying stocks and use them as margin to trade futures and options on futures.

 

[rmorse]

I know that IB represents that and so do other online brokers, but all futures accounts must be a segregated futures account, not commingled with your securities account. They internally move the monies needed for futures margin. The securities account gets SIPC protection and the futures account does not.