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understand however in the NFA eyes there are certaion distinct financial
liquidity requirements between that of a guaranteed IB vs. and independent
IB and of course - the FCM themselves. The FCM takes financial
responsibility of the accounts via a guaranteed IB whereas with an
independent IB takes on more financial liability, liquidity, and accounting
responsibility starting with posting a $35,000 liquid account as a beginning
account - which they may not touch at any time. This acocunt may increase
over time due to the increased amount of equity as new acocunts open and the
business grows.
They do this to typically knock their clearing costs down a $1.50 - $2.00 on
eminis. So yes, in the eyes of the NFA - National Futures Association and
CFTC - there are distinct financial requirements between the the two - hence
the importance of knowing the independent IB's balance sheet.
regards,
Mike
----- Original Message -----
From: "Jack Zaner" <jz@xxxxxxxxxxxxxx>
To: "ViperTrading" <viper@xxxxxxxxxxx>; "Schedlbauer, Joseph E."
<JoeS@xxxxxxxxxxx>
Cc: <omega-list@xxxxxxxxxx>
Sent: Friday, May 31, 2002 10:14 AM
Subject: Re: problems with ANCO Discount Futures
> Mike: Your contention that a customer of a guaranteed IB has
increased
> protection over that of an independant IB is not correct. The fact that
an
> IB is guaranteed or independant does not, in and of itself, determine
> additional financial risk. The real question to ask your IB is whether
the
> customers of the IB are fully disclosed to the clearing firm, which means
> that every customer of the IB is also a customer of the clearing firm. Or
> does the IB clear its business on an omnibus basis; that is on a combined
> basis in one account. If the arrangement is fully disclosed, then de
facto
> you enjoy all the financial and regulatory protections that you would have
> if you dealt directly with the clearing firm.
> Regards, Jack.
> ----- Original Message -----
> From: "ViperTrading" <viper@xxxxxxxxxxx>
> To: "Schedlbauer, Joseph E." <JoeS@xxxxxxxxxxx>
> Cc: <omega-list@xxxxxxxxxx>
> Sent: Friday, May 31, 2002 8:48 AM
> Subject: Re: problems with ANCO Discount Futures
>
>
> > My pleasure! The underlying fees/cearing costs from the CME to a
> > non-clearing FCM (which most are for retail clients) come out to about
> $3.32
> > including NFA fees for emini contracts ona RT basis. From there - the
FCM
> > typically marks up the cost $2.50 - $5 per RT on that to the IB. From
> > there - the IB marks it up to cover overhead and create profit for their
> > business. That does not include software fees which were in my case an
> > additonal $1 per RT.
> >
> > 3 years ago - an IB getting a $8 flat rate per RT w/o software charges
was
> > considered on of the best rates out there - had to do 20,000 monthly RTs
> for
> > an IB to get the cost basis. Nowadays, it's more like $6.00 cost before
> > software charges. We were able to get rid of our software charges by
> > renegotiating a new rate with our new FCM (Vision).
> >
> > Expect on average that there is at least $2 per RT markup over cost to
IB
> at
> > bare minimum when charging $ customers $8.50 - $10 per RT "all-in" on
> emini
> > transactions. IB cost spread is further reduced to the IB if they are
an
> > "independent IB" as opposed to a "guaranteed IB". As a guaranteed IB,
the
> > FCM with typicaly deeper pockets protects the integrity of your account
> > equity as opposed to the independent IB only able to stand on their own
> > assets to support your account equity.
> >
> > So if a IB quotes very low rates - find out whether they are an
> independent
> > IB or guaranteed - if they are independent - make sure you ask for a
copy
> of
> > their financia statement. Many times after reveiwing their financia
> > statement you will find that you are much safer with going via a
> guaranteed
> > IB because they are backed by audited deep pockets of the FCM. We chose
> > this route ourselves - not because we didn't have capital but because we
> > found it much safer all-around for ourselves from a financial and
> compliance
> > standpoint but more importantly for our clients.
> >
> > Best wishes,
> >
> > Mike Herron
> > Viper Trading, LLC.
> > www.vipertrading.com
> >
> > ----- Original Message -----
> > From: "Schedlbauer, Joseph E." <JoeS@xxxxxxxxxxx>
> > To: "'ViperTrading'" <viper@xxxxxxxxxxx>
> > Sent: Friday, May 31, 2002 5:51 AM
> > Subject: RE: problems with ANCO Discount Futures
> >
> >
> > > Mike,
> > >
> > > Thanks for the insight on what it's like to be an IB. I never thought
> > about
> > > or knew what a broker goes through, I just cared about the bottom line
> to
> > > me. For the most part, most IB's I've dealt with have been honest and
> > fair.
> > > This deal with ANCO was the first time I ever felt I was intentionally
> > > mislead. Now I will make sure I know the fees before I open the
> account!
> > > Live and learn.
> > >
> > > Joe
> > >
> > > -----Original Message-----
> > > From: ViperTrading [mailto:viper@xxxxxxxxxxx]
> > > Sent: Thursday, May 30, 2002 6:16 PM
> > > To: Schedlbauer, Joseph E.
> > > Cc: omega-list@xxxxxxxxxx
> > > Subject: Re: problems with ANCO Discount Futures
> > >
> > >
> > > 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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