IB commissions lower than prop firms!! WHY???
- Thread starter smokey_mcPaat
- Start date
Ok, here we go with some answers to the basic questions.
How can IB charge less than a prop firm?
>Simply because they are a retail firm, and are extremely limited as to margin, and (with all deference to my friend def) certain access restrictions (order flow can be directed through IB for listed, to check margins, etc.). Our people have the "use" of capital (not abuse), and most want a place to work out of.
Remote traders pay zero at a measly 200K shares, no desk fees, no data fees.
Office traders usually trade more, and get everything rebated back anyway.
We have many traders who use the "cap" (many more in todays markets than ever before), and they can lower their costs accordingly.
Our medium volume traders (4 mill/mo.) pay .75, and less with cap. Our new traders don't pay ticket charges, which saves them $$ during a learning curve.
Our traders can put in $4Million worth of opening orders, to make $10-$20K per month, with $20K in their accounts.
There is a 100% payout for all those who keep their account above the $15K minimum (which is $10K lower than "pattern day trader" requirements).
I personally think IB is a good retail outfit, as is Trade STation, and others. We simply cater to a different group of people.
As in all business decisions, one should weigh all the factors, stability of their partners, financial strength, etc.
(Not trying to get into debates, but it makes sense for some, and not for some.....and there are always changes in progress).
Don (I'll "duck" now, be sure to pick up the spent cartridges)....
How can IB charge less than a prop firm?
>Simply because they are a retail firm, and are extremely limited as to margin, and (with all deference to my friend def) certain access restrictions (order flow can be directed through IB for listed, to check margins, etc.). Our people have the "use" of capital (not abuse), and most want a place to work out of.
Remote traders pay zero at a measly 200K shares, no desk fees, no data fees.
Office traders usually trade more, and get everything rebated back anyway.
We have many traders who use the "cap" (many more in todays markets than ever before), and they can lower their costs accordingly.
Our medium volume traders (4 mill/mo.) pay .75, and less with cap. Our new traders don't pay ticket charges, which saves them $$ during a learning curve.
Our traders can put in $4Million worth of opening orders, to make $10-$20K per month, with $20K in their accounts.
There is a 100% payout for all those who keep their account above the $15K minimum (which is $10K lower than "pattern day trader" requirements).
I personally think IB is a good retail outfit, as is Trade STation, and others. We simply cater to a different group of people.
As in all business decisions, one should weigh all the factors, stability of their partners, financial strength, etc.
(Not trying to get into debates, but it makes sense for some, and not for some.....and there are always changes in progress).
Don (I'll "duck" now, be sure to pick up the spent cartridges)....
Don,
I think a big part of the reason IB can offer good rates is because they are self-clearing. From what I understand, a self clearing NYSE member pays ZERO commish up to 1099 using nx to send. Since most of IB's customers rarely do more size than that, the IB software will either match the order internally, costing nothing, or send it to the NYSE using nx, again costing nothing. They are essentially pocketing the .01 for the first 500 and the .005 for the next 599 shares ($8 for 1099 shares.) Def will tell you that they have a lot of expenses, and I agree, but rest assured, IMHO, they have room to come down on the comish...
nitro
That's interesting about listed stocks. There is the SEC fee you forgot about, if you're trading a $50 stock, IB has to drop about 16cents for every 100sh to the SEC.
Of course, abolishing the SEC would take care of that problem, but that's being too optimistic.
For listed stocks, maybe they could come down a bit, but let's not forget ECN fees for the naz...between ECN and SEC fees, there may not be much room to get cheaper on the naz fees (except for when adding liq).
The thing about IB is that they constantly lower commissions pro-actively. Options came way down (granted, TH is the options MM firm, and IB will autoex as many options tickets as it can thru TH) and so did futures. Let's also not forget that IB is probably the ONLY big institution that proactively cares about FAIR MARKETS.
Can you imagine if IB didn't exist, and in its place was SLK?? Life would be different for the little guy.
Of course, abolishing the SEC would take care of that problem, but that's being too optimistic.
For listed stocks, maybe they could come down a bit, but let's not forget ECN fees for the naz...between ECN and SEC fees, there may not be much room to get cheaper on the naz fees (except for when adding liq).
The thing about IB is that they constantly lower commissions pro-actively. Options came way down (granted, TH is the options MM firm, and IB will autoex as many options tickets as it can thru TH) and so did futures. Let's also not forget that IB is probably the ONLY big institution that proactively cares about FAIR MARKETS.
Can you imagine if IB didn't exist, and in its place was SLK?? Life would be different for the little guy.
if you ever traded IB you would immediately know why they are so cheap. first let me say i traded with them for 1.5 years and loved them, great fills and dirt cheap.
but you cant trade with just IB, they are complete bare bones with features like charting, even quotes, t+s, customer serivce, etc...so by only supplying bare minimum and depending on volume and word of mouth, they have they have a great biz model.
but remember you will need other charting/quote feeds and software so there ARE other expneses to trading with IB. i think if you add up everything you need at home, feeds, software, charting, cable/dsl, news, etc... it may come close to average prop firms desk fee, sure you can save a little at home depending on what you choose.
if you are a complete newbie or only have a few months experience i wouldn reccomend IB.
i traded IB and now moved to prop. to capitalize on prop. advantages and may pay a little more than IB, but think its worth it for acces to capital, bullets, office/ohter trader support, etc...
either way there is nothing inherently wrong with either set up, just depends on trader preference
but you cant trade with just IB, they are complete bare bones with features like charting, even quotes, t+s, customer serivce, etc...so by only supplying bare minimum and depending on volume and word of mouth, they have they have a great biz model.
but remember you will need other charting/quote feeds and software so there ARE other expneses to trading with IB. i think if you add up everything you need at home, feeds, software, charting, cable/dsl, news, etc... it may come close to average prop firms desk fee, sure you can save a little at home depending on what you choose.
if you are a complete newbie or only have a few months experience i wouldn reccomend IB.
i traded IB and now moved to prop. to capitalize on prop. advantages and may pay a little more than IB, but think its worth it for acces to capital, bullets, office/ohter trader support, etc...
either way there is nothing inherently wrong with either set up, just depends on trader preference
i once got a bad trade, outside of normal range, before i had a chance to contact IB to try and squash it, THEY called ME, and squashed. i was quite impressed. good stuff!
Sorry to be naive but can someone tell me what a prop firm is?
Do you become an employee of the firm?
Do you have a contract?
What is the difference between being a customer of a firm like IB and using a "propr firm"?
Does it allow you to trade without regard to Reg T margin requirements or day trading rules?
By the way, I work for IB and am curious about this topic in that regard.
Thanks.
DB
Do you become an employee of the firm?
Do you have a contract?
What is the difference between being a customer of a firm like IB and using a "propr firm"?
Does it allow you to trade without regard to Reg T margin requirements or day trading rules?
By the way, I work for IB and am curious about this topic in that regard.
Thanks.
DB
http://www.daytradersusa.com/tharp.html
I'll get the article edited/updated soon but this should answer your questions about Prop firms
Robert
I'll get the article edited/updated soon but this should answer your questions about Prop firms
Robert