Thursday, December 4, 2008

** VIDEO ** Welcome TradingMarkets Visitors

Tonight, I welcome visitors from the TradingMarkets.com site who have found their way here via Part 1 of my interview with David Penn [which will appear on the TM site Friday evening] and put the blog in important perspective for everyone.

9 comments:

E-Mini Player said...

Don, just wanted to say Thanks again for sharing the journey. I've been following the blog for a few months now, and look forward to your post after market-close everyday!

Don Miller said...

Thanks E-Mini :-).

John said...

Dear Don,

Can I ask you a commission question?

I am trading the ES doing approx 30-40 round trips per night with 2 contracts. I am charged $5.28 per round trip. I think the rate is expensive!

I asked my broker to reduce the commission fees and he asked me what I wanted to pay per side? I have no idea! Less than what I am being charged though :)

Do you have a per side quote suggestion, so I can negotiate with him?

Thanks in advance

Don Miller said...

Hi John -

The cute answer is of course "as low as possible". But I'll try to help.

Keep in mind there are two types of fees bundled into the $5.28 rate you're paying: The Non-Member CME fee your broker has to pay the Merc ($2.28 for non-members) and their own fee, which clearly is $3.00.

The CME fee is set by the Merc and is non-negotiable. [Keep in mind if you lease a seat, the $2.28 drops to $0.92 per RT for the first 200 contracts, then down to $0.42 after that.] So if you choose to remain a non-member, it's all about cutting into the $3.00 they're charging, the majority of which is likely pure profit after paying their fixed infrastructure costs that are spread across many traders.

Most brokers won't budge for traders trading small volumes. Some have set published fees that are non-negotiable, but tiered based on volumes.

If they're negotiable, which it seems they are in your case, the power of negotiating is in volume. If they know they have the chance to get additional volume from you down the road, they may be open to doing something.

A good benchmark for you may be a known large-name broker with a published retail schedule, and for that you may want to check out Interactive Brokers' pricing on their website. I definitely wouldn't pay more than that, and you can use that as leverage with your broker if they're above that.

IB has two pricing structures ... a bundled and unbundled rate. I haven't researched how the unbundled works, but their published bundled rate (inclusive of everything) is $4.80 per RT. So in my view, you definitely shouldn't be paying more than that, so that's an immediate $0.48 savings.

Assume you trade modest volumes, I think shooting for a $1.00 reduction would be a good target. But if you're volume picks up, you'll definitely want to consider CME membership, or at a minimum, use your increased volume to continually negotiate your rate downward with your broker.

Hope that helps.

Don

John said...

Thanks Don,

I greatly appreciate your lengthy reply. Best of luck for today's session.

John

Eric D said...

John - Thats a high rate for commission for the ES. Check out Open E Cry, Advantage Futures, Velocity Futures for comparison purposes.

The harder part in my opinion, is identifying brokers that uses a reliable & fast infrastructure so you are not trading a delayed tape. Effectively, trading applications are just messaging applications and if their application is slow, your transaction costs will increase due to poor execution.

Regards,
Eric

Ziad said...

Don, thanks for your reply about my seat lease question a couple of days earlier. Since the commissions issue was brought up again here, I just wanted to ask you who your broker is.

Thanks,

Ziad

Don Miller said...

Ziad -

My broker is MF Global (formerly Man Financial). You can contact Pat Lafferty at plafferty@mfglobal.com or 1-800-554-6290.

I personally wouldn't trade with anyone else.

Don

John said...

Eric D - Thank you, I will check them out.