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In a message dated 1/20/01 4:13:58 PM Central Standard Time,
prosys@xxxxxxxxxxxxxxxx writes:
<< I might give www.5perside.com a shot.....currently I'm with
www.jackcarl.com
Bugs in their browser-based trading platform make for unpleasant surprises.
Low commissions and daytrading margins are pluses.... >>
***** Actually, 5perside.com is owned by ED&F Man International, Inc., the
same firm that owns Jack Carl. I believe 5perside was created by First
American Discount Corp., which was recently bought by ED&F Man. And, I think
5perside uses the Futures Online platform that First American had leased when
they were trying to merge with LFG, Lind Waldock and Saul Stone. Futures
Online was a Division of LFG (and now owned by Refco) and there interface
was developed internally at LFG. Theoretically, 5perside should have the
same margin policy as Jack Carl.
***** Both the Jack Carl browser based interface, and the 5perside/Futures
Online platform, are examples of internally produced systems. However, Jack
Carl's ETC browser system originally bought the rights to its front end from
another firm, Auditrack. And coincidentally, First American deployed
Autitrack's system previously to the Futures Online deal.
***** By way of disclosure, I run an electronic trading operation that clears
through ED&F Man and I used to work for First American way back in the Reagan
years, so take my words with that knowledge.
***** These first generation trading platforms will probably be replaced by
private labeled versions of Independent Software Vendors ("ISV") systems in
the not too distant future. I believe brokerage firms are going to find it
increasingly difficult to technologically keep up with the ISVs. The firm
that can put together the best combination of tools to trade all the markets
on one screen, capturing order flow across exchange and market sectors, and
provide the best customer experience will be the winning formula. Refco
seems to be in the hunt for capturing as much retail and local order flow as
possible with all of their acquisitions (Lind Waldock, LFG, parts of
Rosenthal Collins Taiwan, and the local traders futures business of First
Options of Chicago.)
***** The name 5perside is catchy and exploits the low dollar commission rate
that appeals to our desire for minimal costs. However, there are cheaper
rates available from Interactive Brokers ("IB"). While IB offers low cost
commission rates, their objective does not seem to be to just build market
share by accepting lower profit margins. They have a low expense operation
which matches their low price. 5perside actually matched First American's
initial strategy of building market share by offering a low price. First
American entered the discount commodity brokerage business at $16 per round
turn back in the early 1980s when other discounters were charging closer to
$30.
***** Ultimately it is a question of finding the best functionality, service
and price, which equals value. Bad functionality at a low price is not a
good value. Good functionality at a low price, but with bad service is not a
good value either. This is not to say any of the firms I mentioned, or mine,
offer one of these combinations. It is up to each trader to come to those
conclusions themselves, based on their experience and needs.
***** There is an X factor which is going to change a lot of things. That X
factor is Single Stock Futures, which were recently approved in the U.S. and
will start trading in a year in the U.S. and this month in the UK. Think
back to what the New York Stock Exchange was before the introduction of stock
index futures. Look at the weekly statistics from the NYSE that Program
Trading makes up 20 to 25% of its weekly volume. The largest single source
of volume to the NYSE, according to a knowledgeable industry insider, is the
CBOE. Would it not be easier for CBOE traders to lay off their trades on SSF
executed through the CBOE, CBOT or CME rather than the morass that is the way
stocks are traded. A single order book, with real time prices from a single
source. Margining in the same clearing organization (and the Chicago Board
of Trade Clearing Corp. and the Option Clearing Corp. are talking merger).
SSF could become the leading indicator for individual share prices just
because of the time lag in the way some stock trades are routed and reported.
Emini prices are mostly a much better indicator of the S&P market than the
big pit traded ones, just because the prices get out faster electronically.
***** The systems that will be needed to handle the trading that
professionals and the retail public will want to do will not be the first
generation trading platforms developed internally by futures brokerage firms
in the 1990s. The changes are coming soon and there will be some bumps along
the way for many firms and traders.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it! John J.
Lothian is the President of the Electronic Trading Division of The Price
Futures Group, Inc., an Introducing Broker.
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