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Leasing exchange membership
- Thread starter futuretrade
- Start date
That's really the main advantage I can see, unless you wanted to put in some time on the floor as well, to learn a bit about the contracts you are trading. I spend two or three months each year in Chicago in the pits, just getting to know folks, etc., and that is how I pick the brokers that fill my orders when I am off floor. I am primarily a futures option trader, and the pits are where my orders get filled, not electronically, so the broker I use has a significant effect on my returns (and if anyone tells you this isn't important, they don't know what they are talking about.) The other thing that spending a bit of time in the pits does is acquaint you with the specific order flow that is done in each pit, and by each broker. For instance, in bean options, there are a lot of 5 lots done across a wide range of strikes, and pretty big volume overall. It is easy to get a small order done, nobody will mind, and several of the bigger brokers do small orders. In the ten-year options, the volume is much larger, but it is deceptive in that the order flow is fewer but larger orders (lots of 5000 -10,000 lots), done in far fewer active strikes, and most of the bigger brokers don't like to do 5-10 lots, so you are likely to end up with a rookie broker with less clout getting small orders filled if you don't know somebody. I don't know how I would get this information if I didn't actually go down there, recommendations from friends I suppose. But it's a lot nicer to call somebody I know on their headset to get a good quote from the pit, place an order, and get it filled in a few seconds while I talk to him/her.
Jessie
Jessie
Quote from jessie:
That's really the main advantage I can see, unless you wanted to put in some time on the floor as well, to learn a bit about the contracts you are trading. I spend two or three months each year in Chicago in the pits, just getting to know folks, etc., and that is how I pick the brokers that fill my orders when I am off floor. I am primarily a futures option trader, and the pits are where my orders get filled, not electronically, so the broker I use has a significant effect on my returns (and if anyone tells you this isn't important, they don't know what they are talking about.) The other thing that spending a bit of time in the pits does is acquaint you with the specific order flow that is done in each pit, and by each broker. For instance, in bean options, there are a lot of 5 lots done across a wide range of strikes, and pretty big volume overall. It is easy to get a small order done, nobody will mind, and several of the bigger brokers do small orders. In the ten-year options, the volume is much larger, but it is deceptive in that the order flow is fewer but larger orders (lots of 5000 -10,000 lots), done in far fewer active strikes, and most of the bigger brokers don't like to do 5-10 lots, so you are likely to end up with a rookie broker with less clout getting small orders filled if you don't know somebody. I don't know how I would get this information if I didn't actually go down there, recommendations from friends I suppose. But it's a lot nicer to call somebody I know on their headset to get a good quote from the pit, place an order, and get it filled in a few seconds while I talk to him/her.
Jessie
I concur exactly what Jessie has said. A good broker in the pit is a must. It's amazing how many people on this board that think trading on a screen is better then using a good broker in a pit. I can tell you the difference is night and day. A good broker is priceless.
I'd also like to point out that many exchanges have daily caps on clearing fees. For example, at the CME the daily GLOBEX cap is $50. Once you get past about 56 trades a day, ALL clearing fees are waived. That's a savings of $2.28 per round trip for the emini.
What does this mean? For screen traders simply seeking a reduction in costs, the break even for membership is actually closer than many suppose.
What does this mean? For screen traders simply seeking a reduction in costs, the break even for membership is actually closer than many suppose.
I was figuring out the break even for an IOM or IMM lease membership at the Merc for an emini trader.
Accounting for the daily GLOBEX cap of $50 and a monthly lease of $3000, the breakeven is only 1,700 round trips a month. Anything more than that will give you a savings of $2.28 per round turn.
So if you do 2,000 turns a month, you will pocket $684. 3,000 turns a month, you will pocket $2964.
Accounting for the daily GLOBEX cap of $50 and a monthly lease of $3000, the breakeven is only 1,700 round trips a month. Anything more than that will give you a savings of $2.28 per round turn.
So if you do 2,000 turns a month, you will pocket $684. 3,000 turns a month, you will pocket $2964.
To clarify a bit! A trader doesn't really save $2.28 round trip. He saves $.77 per lot after he hits the $50 cap. My rule of thumb is about 220 side per day is breakeven!
CME fees are broken down into three parts:
1. Globex Fee: (Capped at $50 per day for members) $.25
2. Exchange clearing fees: (Variable depending on Membership, but no cap)
3. NFA Fee: $.02 but waived for members
Nonmembers:
Globex $.25
Exchange fees: $.89 (Globex Customer fee $.50 + $.39 clearing)
NFA Fees: $.02
Total $1.16
Members:
Variable rate depending on ownership or lease!
Globes Fee: $.25 capped at $50 per day
Exchange fees: $.39 for lessees (no customer fee)
NFA Fees: $0 for members
Seat leases are approximately $3200 per month, so a trader should consider a membership if he trades more than 200 lots per day.
Risk Less
CME fees are broken down into three parts:
1. Globex Fee: (Capped at $50 per day for members) $.25
2. Exchange clearing fees: (Variable depending on Membership, but no cap)
3. NFA Fee: $.02 but waived for members
Nonmembers:
Globex $.25
Exchange fees: $.89 (Globex Customer fee $.50 + $.39 clearing)
NFA Fees: $.02
Total $1.16
Members:
Variable rate depending on ownership or lease!
Globes Fee: $.25 capped at $50 per day
Exchange fees: $.39 for lessees (no customer fee)
NFA Fees: $0 for members
Seat leases are approximately $3200 per month, so a trader should consider a membership if he trades more than 200 lots per day.
Risk Less
Quote from PuffyGums:
I was figuring out the break even for an IOM or IMM lease membership at the Merc for an emini trader.
Accounting for the daily GLOBEX cap of $50 and a monthly lease of $3000, the breakeven is only 1,700 round trips a month. Anything more than that will give you a savings of $2.28 per round turn.
So if you do 2,000 turns a month, you will pocket $684. 3,000 turns a month, you will pocket $2964.