Question about CME Membership

[MattZ]

Thanks Matt. Actually the link you gave was one of the first places I've visited when researching about membership info. LOL However, it doesn't address any of the questions I listed at the top of this thread. I would love to hear your opinions regarding those questions. Thanks.

Ah, great!

I think that CME leases could evolve into a very lengthy discussion, and there is a part that I can address, costs, FCMs, commissions, etc. These pertain to you directly.
However, there are issues that are legal that pertain to CME, that I do not feel comfortable posting because it's CME territory.

I am sending you a PM with my email, and I would be very happy to assist that way and answer all the questions that I can, and also ask the CME the specific questions that pertain to you.

 

[tiddlywinks]

Thanks for the info. Seriously, I haven't even considered the taxes yet. I'll be trading only my own money. You don't need to become a "professional" to be designated as TTS, right? Please provide more insight on taxes. Thanks.

The easiest and best way imo to learn about trader taxation is to get a copy of Green's Trader Tax Guide. https://greentradertax.com/shop-guides/greens-trader-tax-guide/

The ET section on taxes is littered with misinformation.

Personally, I operate through an S-Corp with TTS. When I reach a consistent 2000 contracts per month, CME membership makes real sense for me. Until then, added costs of membership only gives minimal (in my terms) benefit to me.

 

[Spectre2007]

Memberships will sell at a discount, when this cycle starts breaking down. So a reason to hold off.

 

[addchild]

@schizo

I went through this last summer so I'll try and answer what I can.

1/2. I believe they charge $1000 application fee for each additional membership, I would imagine buying a seat you currently lease would fall under that. I believe this is also the fee if you are a lapsed member, but fwiw, at least with my seat (cbot-GIM), the lease was negotiated for like 10 years and requires a 2 month notice to cancel. Other seats may be different though.

3. Yes the exchange would now consider you a professional. (though contrary to what someone else posted, this has absolutely no barring on your taxes, its just an exchange designation)

4. You are highlighting the fee to trade in the pit. If you buy a membership and trade through globex you pay 0.35, if you lease I believe its slightly higher at 0.47. This doesnt count your platform (cqg) or clearing fees. If you are doing enough volume to justify a seat I would estimate you would be paying around 0.7 for clearing, platform, and exchange.

5. This will probably vary a lot from person to person. I would say I was a very straight forward applicant (paying for my own seat, trading my own money, us citizen, no outstanding debts), the process took me about a month start to finish. About a week for paperwork on my side including time spent mailing the app from California to Chicago, 2 weeks for them to process the application and answer any extra questions the exchange had, and a week to secure the seat and have my exchange fees reduced. For me, after the exchange approved my membership they emailed my clearing firm and the clearing firm reached out to a "seat broker" on my behalf to secure the proper seat and take care of paperwork.

Hope some of that is helpful.

 

[tiddlywinks]

3. Yes the exchange would now consider you a professional. (though contrary to what someone else posted, this has absolutely no barring on your taxes, its just an exchange designation)

And so tax season begins...

Purchasing or leasing a seat classifies as a dealer as far as the IRS is concerned. Dealers are subject to SE or FICA tax. So yes, lease or buy, a seat DOES affect taxation. You are correct however in that "professional" is merely an exchange designation.

 

[schizo]

@schizo

I went through this last summer so I'll try and answer what I can.

1/2. I believe they charge $1000 application fee for each additional membership, I would imagine buying a seat you currently lease would fall under that. I believe this is also the fee if you are a lapsed member, but fwiw, at least with my seat (cbot-GIM), the lease was negotiated for like 10 years and requires a 2 month notice to cancel. Other seats may be different though.

3. Yes the exchange would now consider you a professional. (though contrary to what someone else posted, this has absolutely no barring on your taxes, its just an exchange designation)

4. You are highlighting the fee to trade in the pit. If you buy a membership and trade through globex you pay 0.35, if you lease I believe its slightly higher at 0.47. This doesnt count your platform (cqg) or clearing fees. If you are doing enough volume to justify a seat I would estimate you would be paying around 0.7 for clearing, platform, and exchange.

5. This will probably vary a lot from person to person. I would say I was a very straight forward applicant (paying for my own seat, trading my own money, us citizen, no outstanding debts), the process took me about a month start to finish. About a week for paperwork on my side including time spent mailing the app from California to Chicago, 2 weeks for them to process the application and answer any extra questions the exchange had, and a week to secure the seat and have my exchange fees reduced. For me, after the exchange approved my membership they emailed my clearing firm and the clearing firm reached out to a "seat broker" on my behalf to secure the proper seat and take care of paperwork.

Hope some of that is helpful.

Thanks for the helpful info. So what's your thought so far? Has it worked out to your favor?

 

[addchild]

Thanks for the helpful info. So what's your thought so far? Has it worked out to your favor?

Sure, It pays for itself almost every day. I plan on leasing a second seat next month.

 

[CannonTrading_Ilan]

If one is trading the emini & emicro equity products:
One time membership fee is $2000
current lease price is approx. $300 per month ( $275 bid/ $300 Ask right now)
that will reduce exchange fees from $1.18 per side to $0.47 per side on eminis and from $0.2 per side to $0.07 per side on the MICROS!

 

[garachen]

I like seat questions.

1) for these types of questions - as others have said - call your FCM first and the CME afterwards if needed.

2) tax. It’s a wash. Owning or leasing a seat does trigger self employment. But not owning a seat triggers passive income which is Obamacare taxed at the same rate. Make sure you do your taxes correctly but the amount you pay will be almost identical.

 

[tiddlywinks]

2) tax. It’s a wash. Owning or leasing a seat does trigger self employment. But not owning a seat triggers passive income which is Obamacare taxed at the same rate. Make sure you do your taxes correctly but the amount you pay will be almost identical.

Not to be argumentative or with intent to turn the thread into a tax thread...
Obamacare taxes are applicable only above certain thresholds, dependent on filing status, and are 0.9 and 3.8%, for a total of 4.7%. SE tax is 12.4% on the first 132,900 (2019), and 2.9% on everything, totaling 15.3%... SE tax vs Obamacare tax is not a wash until applied at, for lack of a better word, an extreme.

Taxes in relation to the OPs questions is absolutely something to be aware of... gross earnings from trading and taxation must be factored into determination as to whether or not a seat is truly advantageous. Reducing expense is always a good thing, but only if the reduction is able to be retained.