I want to reduce my commissions!

Everything you need to know is on the CME/Nymex website.

The big nut is the Member versus Non-member exchange rate structure.

Member/Lessee Day Trade Rate: 0.45

Member/Lessee Overnight Trade Rate: 0.70

Non-Member Rate: 1.45

NYMEX Division
Reported Lease Information - New Leases
Effective Date Term Lease Price Negotiated Date
01/03/11 3 mo. $1,100 01/03/11
01/01/11 3 mo. $1,100 01/01/11
01/01/11 3 mo. $1,100 01/01/11
01/01/11 6 mo. $1,150 01/01/11
01/01/11 6 mo. $1,200 01/01/11
01/01/11 6 mo. $1,000 01/01/11
01/01/11 3 mo. $1,150 01/01/11
12/24/10 3 mo. $1,100 12/24/10
12/08/10 3 mo. $1,100 12/08/10
12/01/10 3 mo. $1,100 12/01/10

I will get the cheaper seat lease rate when my current six-month lease expires.

NYMEX Division Class A Membership Seat
Bid Offer Last Sale Date
NYMEX $210,000 $225,000 $225,000 12/29/10

You want to buy a seat when you have a very good year, and the bottom line calcs says it makes sense in terms of an itemized business-related tax deduction.

If IB wants to be pricks regarding their commission vig, then you have to move. I would suggest a major Chicago FCM with TT or CTS as an execution platform - greater speed, better execution mechanics with one-click DOM trading, less loaded ECN, and cheaper commissions than IB.

Maybe you're not a retail type of guy anymore.
 
Quote from forsalenyc:

Has anyone here in ET negotiated with IB for better rates than otherwise posted rates on their site?
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The guy would be a serious Jedi. I suspect they don't give a shit unless you have a 50 m$+ account or trade as much volume as Rotter.:p
 
Quote from TraDaToR:

The guy would be a serious Jedi. I suspect they don't give a shit unless you have a 50 m$+ account or trade as much volume as Rotter.:p
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In my experience I have never heard of them swaying from the posted commission schedule for retail accts. As been told, that's why they have a tiered pricing system.

Both Velocity and Advantage offer significant commission reductions if you do volume, but you are going to be a little hard pressed to find a broker that offers a clusterf** like TWS*.


*for the record, IB is my primary broker
 
IB really isn't the point at all in the discussion - it's paying Member versus Non-Member rates.

You lease a seat. Sometimes a couple. I've done it since 1992. That's what makes ICE and Eurex so nice, at least the way their original business plan was set up before the greed set in.
 
Thank you bone.

Yes, I was looking at the CME site on lease etc.

One question: The membership alone will give the cheaper rates, then why lease a seat also? In order to lease the seat, you have to first be a member anyway.

I was also reading at traderstatus.com about why file tax return as a professional trader vs. individual. As trader filer all the gains are reported as ordinary income, that is a big loss for futures traders.

The rules on the "trader filing" seems very confusing and IRS does not like it anyway. Is there any rule under which one can trade with a membership or lease or corporate membership etc. but still file as an individual on 1040 the futures gains. Can you please comment on it based on the practice of traders you know. Thanks.
 
I have discussed it with IB in past, they tell me they do not negotiate. "We have people who generate lot more in commissions that you do" that's what they told me.

Yes, i am looking into other brokers. But they all are about the same unless I go the "membership route". I have discussed the tax implications of that.
 
You apply for exchange membership, and part of that process within the actual application is to specify a seat lease in lieu of a seat purchase - a very common and routine practice.

All major Chicago FCM's assist their clients with this process - again, very common.

If you are trading futures on a CFTC regulated exchange (or foreign exchange with a CFTC "no action" letter) you report your income on IRS Form 1256 - that income is treated to blended captial gains treatment which is capped several percentage points below ordinary income rates for higher bracket earners. You also do not have to pay Self-Employment Tax. If you want to attach your year-end journal entry or December 2010 monthly statement to your return then fine, but you do not need to get any IRS declaration about your trader status in advance with futures income. Thanks to all the Illinois Dems in high places, the Chicago business model is intact. You can also itemize your all of your business and personal deductions, and if you're like me, it won't matter because AMT will kick in anyway.
 
Quote from bone:

You apply for exchange membership, and part of that process within the actual application is to specify a seat lease in lieu of a seat purchase - a very common and routine practice.

All major Chicago FCM's assist their clients with this process - again, very common.

If you are trading futures on a CFTC regulated exchange (or foreign exchange with a CFTC "no action" letter) you report your income on IRS Form 1256 - that income is treated to blended captial gains treatment which is capped several percentage points below ordinary income rates for higher bracket earners. You also do not have to pay Self-Employment Tax. If you want to attach your year-end journal entry or December 2010 monthly statement to your return then fine, but you do not need to get any IRS declaration about your trader status in advance with futures income. Thanks to all the Illinois Dems in high places, the Chicago business model is intact. You can also itemize your all of your business and personal deductions, and if you're like me, it won't matter because AMT will kick in anyway.
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Transactions in futures and futures options are reported on IRS Form 6781. 1256 is the relevant section of the tax law. Both exchange members and nonmembers get 60/40 treatment for futures and futures options.

Members of futures exchanges are subject to FICA taxes on their futures trading profits. Nonmembers are not subject to FICA taxes.
 
I never minded paying higher commissions with IB because before the credit crunch they used to pay decent interest on your account.


I pay around 5% of my starting account in commissions to IB (including exchange fees) by the end of they year.

So i need to make 5% a year to just break even.

IB used to pay me something like 2 or 3% a year in interest. Which went along way to mitigating the commisions.

Since interest rates dropped to near zero we no longer get that advantage from using IB any more.

The OP is trading less than 1000 contracts a month.

Sadly IB only start giving discounts above 1000 contracts a month.

And even then they only give the discounts on contracts traded above 1000. Not the first 1000 traded.
 
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