clearing costs

Discussion in 'Trading' started by chasinfla, May 30, 2002.

  1. I mean what it costs the <i>clearing firm</i> to do it, not what we pay.

    anyone want to make an educated guess as to what they <i>really</i> are?

    im guessing .0005 for clearing (not execution).

    This is based on some very rough estimates for fixed and variable overhead and shares/year.

    staff 50 heads at 50K = $2.5 mil
    rent etc. $2 mil
    other fixed $2 mil

    shares 1.25 bil

    6.5 mil/1.25 bil = .00052

    can I get a reality check on this (before they shut it down)
  2. I dont know exactly what the cost of "clearing" is...but, I do know for a fact that people can get "free" commission to trade if they have some amount of cash in deposited in that firm. What this means is that the cost of execution is virtually nil for those firms and those firms make their money on the interests they make on the money on deposit...intrests of other investments.
  3. I used to work for a BD that was bought last year by a major ecn and the ecn's clearing costs were figured @ $.75 per thousand shares. Nice mark up! Over 100% to the unsuspecting BD.
  4. skynet


    who was th bd? and which ecn was that?
  5. I really shouldn't say, being an key employee I was privileged to a lot of info. It's really easy to figure out. You can do a search on the internet for a the buyout, the bd was bought for 150 million, and the ecn is a trades on the nasdaq.
  6. i have no problem with a 100% markup. there is risk involved in clearing.

    Yet, I know a commodities trader who says that the cost of clearing his trades is minor -- something he barely thinks about when trading. Yet many stock traders -- props -- can barely cover the commissions, which are designed to cover the costs of clearing, execution, risk premium, and generate a profit for the service provider.

    What astounds me is that the risk in clearing commodities is potentially orders of magnitude greater thant the risks of clearing stocks, and yet the cost of clearing stocks (to the trader) is gigantic compared with that of commodities.

    My premise is this: High volume, low risk traders are justified in paying lower clearing costs, because they are low risk, regularly profitable, and buy the services in bulk. And yet, I suspect we are paying a markup of 600% or more on our clearing. We are told that 'there is risk involved.' Baaaugh. We grind out profits the way ants build mounds, and we never have big losses. The reason we do so many transactions is that we are always cutting risk. We are like the oarsmen on the slave ship in 'Ben Hur.'
  7. skynet


  8. How much do you need?

    Which firms will let you go free?

    Is that only if you add liq to island or instinet (or trade through the firm's MMID)?

    PM me if you don't want to post it.
  9. make sure you post what he pm's cause im curious :D
  10. [
    can I get a reality check on this (before they shut it down) [/B][/QUOTE]

    before they shut it down?

    are we not suppose to talk about commission costs, fees etc??

    If that's the case i assume this is run just to promote a few firms.
    #10     Jun 2, 2002