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Barry Small wrote:
>
> Well you sure will save a lot of commission fees and get better individual service with an LFG IB.
>
I am going to try and do my best at explaining what I know about LFG &
ZapFutures. It seems that there is some confusion on this matter. I
had the opportunity to visit with Bill Kaiser of ZapFutures this past
Monday (3/23/98) in Chicago and think I can explain how the confusion
exists when people talk about these two entities.
I use the word entities because ZapFutures is a division of LFG.
However, they actually compete with each other (they compete with
themselves). ZapFutures was started by Bill Kaiser and two other
partners, one of which is also the CEO of LFG. The CEO of LFG has since
pulled out of the ZapFutures side because he considered himself
double-dipping because he was making money on both sides. He was only
in the original group to get the division going.
One of the products used to do Electronic Order Entry (EOE) is a product
called Leo Web. Both companies LFG & ZapFutures can market the LeoWeb
product. ZapFutures has additional products other than Leo Web that LFG
cannot market under the LFG umbrella.
ZapFutures does 70% of the EOE for LFG. That means that 30% is done by
IB's that use LFG but are not affiliated with ZapFutures. The
difference is subtle but significant.
ZapFutures is in the Chicago Merc building. The support number that you
call if you have a problem with LeoWeb is routed to a room with 6
people that can answer the phone. If you are part of the 30% that go
straight through LFG then your calls are routed to an LFG office in the
Sears tower manned by one person to handle 200 IB's.
It's my understanding that people who trade through ZapFutures are more
likely to get better commissions that if you go through LFG. Now you
might ask "How can that be?". Well, the way it was explained to me is
that ZapFutures still does all of the risk management for both sides and
passes a cost back to LFG that the IB's have to pay. If you are a
customer of ZapFutures then they can choose to reduce this fee because
they are making money on you on the commissions.
I explained to them that it seemed that they had created a vary tangled
web. Bill's response was that LFG thrives on conflict of interest.
What that means is that each division is it's own profit center and
often are competing for the same retail customers.
I use LeoWeb every day and trade via ZapFutures. I've given this guy's
name out before and have nothing but positive things to say about him.
His name is Ray Flowers here in Dallas ( 214-826-8023). He is an IB for
ZapFutures and has 16+ years in the business. Unless you are using a
broker in a managed account, you won't spend as much time as you might
think talking to "your broker". If you have problems with LeoWeb they
have a support line for that. There is an emergency line if you are
having problems placing an order. I use Ray to help answer questions
about the market place that 16 years can teach you.
As far as commissions, you get what you pay for. I for one certainly
want the best commission I can get consistant with good service. But
for the same reason that we have Wall Mart, Sears and Neiman Marcus each
person expects different levels of quality and makes a decission to
sometimes (not always) to forgo quality for price. The secret is trying
to find the correct balance. I'm not real fond of paying extra just to
have a designer lable on my butt. At the same time I don't want to
purchase items that will not meet my expectaions. IMHO, brokers are the
same. If you find one that you trust, as long as the fees are in the
ballpark, having the absolutely lowest fee is not a requirement for me.
In addition, as I have said before, if you are new to trading then your
broker should be your mentor. If you don't trust him then get another
one. Would you go to a doctor and put your life in his hands if you
didn't trust him? You are doing much the same thing with a broker. I
have had some that I would like to see burned at the cross and one I
would cut off viatal parts of my body for. You figure out which one I
use.
I hope this helps clear up the LFG/ZapFutures confusion.
Needless to say, my standard disclaimer applies. I trade my own account
and use LeoWeb. If I could figure out how to make any money out of
everyone else using LeoWeb I would but I can't.
Mark Byrd
Richardson, Texas
(972) 699-7788
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