sorry in advance if my question is to naive... I'm a retail option trader that trade with some brokers during the last five years (IB,tradestation,tasteytrade) I wonder if it possible to trade without them ? Lets say i want to trade directly with 'CME' or 'CBOE' can i pay them directly the fees and trade without the middleman? Thanks, Tal priel
You can not trade as a regular individual directly with exchanges. You either become a broker dealer yourself or trader from broker dealer
You could buy a seat - during major crashes they tend to be cheap. Or get your feet wet by joining The Small Exchange
Could you please elaborate on this? My understanding is that one needs to be a broker dealer to deal directly. Can exchange seat owners (lets say of CBOE) trade directly with the exchange? If so, what software & licenses are needed?
I’m a little rusty so I won’t try to explain how the exchange system works. You should read a study guide for the Series 3 exam. It will explain how it all works. To put it shortly- the exchange members guarantee end of day reconciliation funds. These seat holding members have clearinghouses under them that guarantee their retail traders end of day funds. The retail brokers are under a clearinghouse and don’t maintain funds to clear trades, but they are responsible to collect margin calls from the retail traders. They are also required to cover the deficit if the retail trader doesn’t pay. The whole system is set up so each tier is manageable. If blockchain ever makes it into futures it could eliminate a lot of this stuff but right now there are several good reasons to have the retail trader a few steps away from the market. The main one is guaranteeing funds for the winning traders at the end of the day.
You needed a funded brokerage account with a broker who is clearing with the CME in the case of futures and future options.