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As a competitor of Anco's and other IBs for years, I can say that deal is
one of the oldest tricks in the book for pricing special offer commission
rates. We used to offer online stock trading as well in the past and
noticed the same costly bait & switch games for advertised commission rates.
When we tried to tel prospective clients what the real charges were for our
competitors on deals like that, they turned a blind eye and went right to
the company with the offer that was too good to be true.
What we did to promote fair, upfront commission pricing was to create a
sliding commission schedule based on total monthly volume contracts traded.
That way, the customer knew what the base rate was and got a rebate check
(deposit) back into their account the 2nd day of the new trading month for
hitting certain price hurdles. We also made the commission rebate
retro-active back to contract 1.
The reason we did this was two fold:
1) to be up front with ALL costs so client knew thoroughly ahead of time
the cost of commission per contract, and
2) so that it did away with "haggling" over what the prospective client
claimed to trade per month so he/she would get a better rate; this way the
client would truly be in charge of his own cost structure.
The results...no one who truly traded professionally ( once a day) were
that excited about it. None of our existing cients wanted to change to the
new structure because they were doing better with the pre-agreed set rate.
So what it does come down to in my opinion is that traders want a good, set
commission rate, with all costs advertised up front, with some service,
accountability and reliability of online trading platform and broker
relationship.
We also found that FCMs themselves do not advertise ALL of the little rates
that are associated with online trading platforms/software and clearing
fees, etc. to their prospective Introducing Brokerage firms! We
unfortunately found that out the hard way recently and had to switch FCMs to
reduce our costs for offering a software platform to our clients. We have
found that patsystems platform offered us the most stability having used
this for the last 20 months at 3 different FCMS. The key was negotiate a
cost where there wasn't a "pass-through" software cost of using the platform
to the IB (which in turn was supposed to be passed-through to the client).
We found out this cost 6 weeks after our new FCM relationship began. A $1
per contract! It was too late to pass the cost to our existing clients so
we ate it. We also did not want our new prospective clients to pay the BS
charge either so we ate it for them! Those $1 charges add up when your
trying to grow a IB business effectively while maintaining an effective
price edge over the competition!
So what does it all mean? Call your broker up and get a better rate or move
the business! There is room in his/her profit spread to give you. If they
cannot, it means that either a) they or their IB is owner is too greedy and
therefore their (brokers) best interests come before your own or b) their
firm doesn't do enough monthly volume for the FCM to give them a good rate.
We were able to reduce our clearing costs this year by 25% so prices have
come down. Not as much as the retail client thinks though for the
above-average Guarnteed IB from the FCM.
The problem is that I have found via management is that many futures brokers
become too complacent as theri business grows to a certain point - then they
stop prospecting for new clients and count on your large commission spread
to pay al of their bills and accepted quality of life! The older brokers
are here to stay because they recognize the need to aways remain
competitive - the younger ones are gone in months to a few years. the older
broker inherits the book of business for the young broker who quit or got
fired and offers a lower rate to his/her newly inherited client to keep the
business or get them tradng again.
This June we'll be running an ad when our web site is reconstructed (to show
our new products, clearing arrangement, commission rates, etc. -) to show
our wares and prices for discount online trading via our IB. It will be
simple - $9.99 + NFA fees only (that's 4 cents per RT) to clear all emini
contract trades with a min. act size of $5,000. I imagine the pricing will
be the same for single stock futures when they come out on the 21st. No
data fees, etc. - and you trade on the patsystems platform. The ONLY other
charge is if the client does not make at least 20 trades per month. If they
do not - there is a $50 monthly patsystem charge. Now there is a $50
patsystem charged passed to us for clients who do not trade at least 50 RTs
per month - we're going to eat the charge for those people who do between
21-49 trades only for the month. But that's what is needed in my opinion
for IB growth. This rate comes of course with service, accountability and
reliability of the online platform and broker relationship.
75% of daytrading clients are gone over the last 2 years - more than 60% of
brokerages are closed over the same period. Recession causes attrition and
if companies aren't willing to reduce rates in times of dwindling trade
volume and manage their overhead better - then they will become extinct as
well.
Best wishes,
Mike Herron, CTA
President
ViperTrading, LLC.
www.vipertrading.com
THERE IS A RISK OF LOSS TRADING FUTURES & OPTIONS. PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS.
Viper Trading, LLC. is a Guranteed IB of Vision, LP.
----- Original Message -----
From: "Schedlbauer, Joseph E." <JoeS@xxxxxxxxxxx>
To: "Omega email list (E-mail)" <omega-list@xxxxxxxxxx>
Sent: Thursday, May 30, 2002 11:55 AM
Subject: problems with ANCO Discount Futures
> I recently had a bad experience with ANCO Discount Futures. Their web
site
> has an advertisement for $9 round turn commissions, so I thought I would
> give them a try. It wasn't worth it. They charge so many fees that the
> round turn commission is actually more like $20 a round turn. So I
> transferred my account. They charged me $100 to do that. Also, their
> on-line trading system leaves much to be desired. It frequently rejects
> valid orders and can't keep the total equity accurate.
>
> Needless to say, I recommend staying far, far away from ANCO "Discount"
> Futures.
>
>
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