Individual exchange members in Chicago : what structure?

TraDaToR

TraDaToR

Hello,

I would like to know how ( and if )individual members of CBOT and CME are incorporated. I am not interested in corporate memberships.

Do locals simply trade in their own name( and just fill income tax at the end of the year )? sole proprietorship? Can you create an LLC or a structure and trade with your individual membership?

Thanks a lot for your help. Apparently I must create a structure to immigrate in the US but I don't want a corporate membership...Problem.:(
 
They really just want to make sure that the benefits of the seat are flowing to just a single individual. They are not such sticklers on tax/liability structures.

So, it's pretty common if you set up a single member LLC, or a two member LLC (with two seats) that the discounts will flow through as individuals. You just have to talk to them (or better, go through your clearing firm's membership department).
 
Thanks a lot Garachen, you are really helpful. Yes, there will be only one trader, me.

So if I understand it right, I can buy an individual membership then set up a single member LLC for immigration purpose to finally trade in the name of the LLC with individual member rebates. ??? I will talk to my clearing firm about it.
 
Yes. What you are asking for is not uncommon. They are pretty flexible as long as the intention of individual member is followed. No commission sharing.
 
Other than reduced clearing fees, are there any advantages to being a member in an exchange such as cme and ice? Iow, are there any structural edges a member has order execution wise vs. A public customer firing off orders on IB? Thanks.
 
Quote from TraDaToR:

Great. The account must also be an individual one, right?
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No. For them 'corporate' means lots of people. 'Individual' means one person. It's not tied to the entity that owns the account. It's tied to how many people are getting benefits. So you buy the seat in your name then pledge it to your company then both your personal and corp accounts will get discounts. Because its all really you.

As I said before. This is all very common. They are used to traders doing things for tax reasons. Here's an example of something I did.

I bought a single FULL Cbot membership under which I personally trade lots of ags. In addition I have pledged the AM portion of that membership to my company where other people trade treasury futures. Then I bought 1/2 the CME shares I needed and am 'renting' the other 1/2 of shares.
 
Quote from garachen:

So you buy the seat in your name then pledge it to your company then both your personal and corp accounts will get discounts.
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Ah OK. It can be both. Capiche. Thanks a lot.

MushinSeeker, no you don't get special edges in execution being a member( except if you trade on the floor of course ). If you place a limit order at one price and then a member place a limit order at the same price, you will still be filled first with IB. But there are some high volume/ low average trade strategies where you simply need the membership to be profitable.
 
Quote from Blotto:

garachen, it has been an absolute pleasure to read your informative posts.

If you have time and are inclined to comment on the following, it would be much appreciated.

What would be your advice for a successful small independent trader looking to grow and reduce costs? Low six figure account size, 12,000 sides a month split between CME (IMM and IOM), NYMEX, COMEX, EUREX, and LIFFE.

It would seem that that a corporate membership at CME (ECM-W volume incentive programme) under an LLC along with lease of nymex/comex seat would be a starting point. You said elsewhere that the minimum required to trade futures is a clearing firm and connectivity. This implies that it would be possible to cut out brokers etc entirely and deal directly with a clearing house. At what size does this become feasible?

The problem I've encountered before is that I need position limits in a dozen futures markets. I'll be in two at a time at most, but use quite high leverage and therefore a clearing firm I spoke with some time ago was uncomfortable with the idea of limits in so many products. I don't think they had come across this before, but I may have misunderstood. (eg per $100k equity, I'd want 10 lot limits in everything)

Currently paying out 12-15% of gross profit in costs trading futures in a "retail" account, would like to reduce this as I grow, and plan on restructuring entirely in the next 12 months. No institutional background / employment and therefore very few industry contacts, none in Chicago futures. It makes sense that a lot of opportunities would be discovered by, or only open to, people with contacts in the appropriate part of the business.

Without connections, what would be the minimum level to start approaching firms, and what would be the best way to go about this? Haven't thought beyond speaking to existing clearing firm about exchange membership possibilities.

Thanks.
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Blotto, as someone in a very similar position I would be grateful if you could let the other readers of this thread know what you learn from your telephone conservation with garachen as I think it would benefit a few of us greatly. I'd ask for some personal advice myself but obviously garachen isn't in the business of running a telephone helpline and I do not wish to impose on them.

Many thanks.
 
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