Tastytrade, Peak6 invest $10 million in new exchange

[ajacobson]

The rules already exist that allow you to incentivize members and he proposes a structure where he brings in ownership/membership for a "$100" fee. That fee is either way too low or he needs 100,000 at their $10,000,000 capital raise, but I do expect these numbers to evolve. You may not need an NBBO as the products won't be fungible - you just need volume. Many of the new products on the futures exchanges(worldwide) have had trade incentives attached to them. Some for a limited amount of time.
When the CBOE introduced FX options in the 1980s the membership got a volume based split of a monthly trade incentive.
The wildcard will be what Peak6 has on the shelf.

BTW I fully agree the outright payment and maker/taker incentives should go away.

 

[TickSeeker]

Let's say they are able to attract liquidity ie. tight bid/ask spreads and offer the lowest retail commissions I have no problems to see this will be a very succesfull business.

 

[bone]

and offer the lowest retail commissions

That is the part which is ominously MISSING from Sosnoff’s marketing hyperbole. It doesn’t really matter to an FCM or a brokerage if a futures contract has $100,000 notional value and a $31.25 tic size - or a $10,000 notional value and a $3.13 tic size - it costs THE EXACT SAME to service that trade and that trader. I am thoroughly convinced that the brokerage and exchange fees will not be proportionally smaller.

Nothing new here - look past the carnival barker as this has been tried in the past by all the trading exchanges. The CBoT even had a super low entry cost exchange trading mini contracts both on the floor and on the screen called the Mid-Am.

My concern is that this is a very inexpensive way ($10M investment) for these investors to attract naive $5K retail futures accounts in order to bleed them dry with fees. The problem with “micro” or “mini” Futures is that it attracts only one class of order flow participants: speculators. Bigger contracts (ie, CME, ICE, Eurex) attracts commercials and hedgers and longer term institutional investors. This is nothing new. CBOT had the Mid-Am exchange - same low cost entry mini sized contract business model, dried up. Most of the clerks and back office workers traded on it and they all had the same complaints - since all the participants were other local spec traders, liquidity was spotty - and if you really needed to get out it was quite painful.

 

[traderjo]

old thread but prompted me to ask few questions to the experts
- Is this business same as Nadex then? with some exotic products based on main Index/ Commodities/ Currency etc?
- Is Nadex a true exchange? they claim they are but is it not true that the main market maker and the exchange is owned by same parent company? and what if there are not many independent market makers? are there?
If this is true then is there a conflict of interest same as with a MM business model in FX OTC brokers and clients?
- About building a product which is similar to existing branded product , for example Nadex spreads or Binary on ES, does the operator have to pay something to CME? or to the organisation who owns the Brand "S& P 500 SPX index"
Or in other example Does CME has to pay anything for having its Nikkei Futures contract to whoever owns the Nikkei index brand

 

[bone]

Or in other example Does CME has to pay anything for having its Nikkei Futures contract to whoever owns the Nikkei index brand

Oh hells yeah. For example, Eurexchange pays a fee for the Dax and the EuroStoxx to Deutsche Börse AG for the use of those indices in a futures contract. Likewise, CME pays a fee to Dow Jones for the use of the S&P and Dow Jones indices in those respective futures contracts. Likewise for the futures on the Nikkei, FTSE, etc. etc.. That is worldwide IP that must be purchased.

Small Exchange will have to purchase those rights - and it is conceivable (I don't know) that CME has an exclusive rights agreement with Dow Jones for exchange cleared regulated futures contracts on the DJI and the S&P.

 

[Seb345]

I feel like it's interesting. I wonder what they will do with this in the future. I have been thinking about it and I have been wanting to invest in something that might be productive in the future. I have been more inclined into investing in real estate with little money because I feel like the general market is on the rise right now but hey I might be wrong. Trading has been a thing that I have been into for a few decades now. I am thinking of expanding my horizons just the tiniest bit and I feel like real estate might be exactly what I need. Any advice?

 

[lakersgirl]

I feel like it's interesting. I wonder what they will do with this in the future. I have been thinking about it and I have been wanting to invest in something that might be productive in the future. I have been more inclined into investing in real estate with little money because I feel like the general market is on the rise right now but hey I might be wrong. Trading has been a thing that I have been into for a few decades now. I am thinking of expanding my horizons just the tiniest bit and I feel like real estate might be exactly what I need. Any advice?

thanks for the information