futures trading and broker selectionfiles.meetup.com/1004673/futurestalkdraft.pdffutures compared to...

Futures Trading and Broker Selection

June 13, 2011

Copyright © 2011 Don Brady

Partial Draft Outline Only – please attend the talk for the detailed discussion

Topics to Cover

• Published Broker Comparisons • Broker Financial Strength • Default Choice: Interactive Brokers ? • Problems with Interactive Brokers • Specialized Futures Brokers • Negotiating Commissions • Major Trading Platforms • Major Routing and Execution Platforms

Futures Compared to Stocks

• Example: S&P 500 trades from 1250 to 1255

• SPY is the ETF

• ES Globex futures: 50 x index

• SPX is the pit contract: 250 times

• Difference in options (100 shares versus 1 future)

•

Trader Taxation

Don Brady, March 3, 2009

Barrons 2011 Broker Review

http://online.barrons.com/article/SB500014

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2.html

Barrons 2010 Broker Review

Broker Reviews on Elitetrader.com

• Interactive Brokers 389

• Thinkorswim 90

• Open E Cry 62

• Oanda 56

• TradeStation Securities 56

• MB Trading 48

• TransAct Futures 42

• Scottrade 39 ……

LARGEST FUTURES BROKERS

BY NET CAPITAL

http://www.cftc.gov/marketreports/financialdataforfcms/index.htm

UBS SECURITIES LLC 11,592,109,893

GOLDMAN SACHS & CO 10,505,347,097

MERRILL LYNCH PIERCE FENNER & SMITH 10,161,569,475

CITIGROUP GLOBAL MARKETS INC 7,875,144,300

JP MORGAN SECURITIES LLC 7,850,479,654

CREDIT SUISSE SECURITIES (USA) LLC 7,795,713,905

MORGAN STANLEY & CO INCORPORATED 7,305,943,892

DEUTSCHE BANK SECURITIES INC 6,753,993,203

JP MORGAN CLEARING CORP 6,092,471,903

BARCLAYS CAPITAL INC 6,090,810,729

JP MORGAN FUTURES INC 2,532,593,354

NOMURA SECURITIES INTERNATIONAL INC 2,344,986,510

MERRILL LYNCH PROFESSIONAL CLEARING 2,256,306,248

NEWEDGE USA LLC 2,185,804,237

RBS SECURITIES INC 1,962,624,000

GOLDMAN SACHS EXECUTION & CLEARING 1,784,323,336

BNP PARIBAS SECURITIES CORP 1,556,440,271

MORGAN STANLEY SMITH BARNEY LLC 1,334,030,555

UBS FINANCIAL SERVICES INC 1,295,635,862

INTERACTIVE BROKERS LLC 1,225,839,821

The ideal Futures Broker

• - All exchanges, all products, options, spreads

• - Exchange Minimum Margins

• - Fees $0.50 per side (plus exchange) no negotiation needed

• - Wide Selection of Platforms and Routing

• - Implied Contracts accessible (explain)

• - Direct access without screening delay

• - Free Quotes, Every Tick, Instant Fills

Arguable Initial Choice: Interactive Brokers

• Universal Account (no transfers needed)

• HK, European, Canadian Stocks and Futures

• IRA’s can trade futures without custodian

• Financial Stability

• Free API with stream quotes and order entry

• Low fees ($0.85 per side plus exchange fees)

• Under 2% margin rates for stocks

• Large Inventory of Borrowable Stocks

Problems with Interactive Brokers

• Aggregated ticks

• Instant Liquidations policy

• Errors in pricing model intrad-day

• Illiquid margin penalties

• Limited implied spreads (cf “combos”)

• Missing ICE options

• Impersonal customer service?

Specialized Futures Brokers

• Advantage

• AMP

• Deep Discount Trading

• Global Futures

• Infinity

• Mirus

• Optimus

• Velocity

• Vision Financial Markets

Major Trading Platforms

• Ninja Trader

• CTS Cunningham T4

• Commodity Quote Graphics

• Trading Technologies X_Trader

Major Execution and Routing Platforms

• CTS Cunningham

• Rithmic

• Trading Technologies

• ZenFire

Rithmic

• http://rithmic.com/

• http://rithmic.com/home.html

• http://rithmic.com/partners.html

• http://www.rithmic.com/rithmic_sol.html

DeepDiscountTrading

• An example of a wide selection of Platforms, Feeds, and yet low commissions

• Clears through Crossland

• http://www.deepdiscounttrading.com/

• http://www.deepdiscounttrading.com/TradingPlatforms.html

Futures: Crude Oil

• WTI, Brent

• Spreads: high prevalence

• Implied Contracts

• Options

• Contango, Backwardation

• Fulcrum Behavior

• ETF’s: USO, BNO, Rolls

Futures Spread Trading

• http://www.spreadprofessor.wildapricot.org/

• He recommends:

• Advantage

• eSignal or CommodityQuoteGraphics

Demos

• We will have demos of several platforms