Harry, Don't confuse trading against a client with using clients funds to trade. For starters, the speed and transparency of the eminis these days makes it hard to believe that any reputable broker will or could do as you believe is going on. I'm not going to go tit for tat with you as you're bound to find some conspiracy minded web site, or provide reference to an archaic tidbit that will distort the truth. I can speak for IB and I know how funds are segregated and I know they are completely separate from the proprietary side of the business. I also have to believe every reputable registered futures firm or broker mentioned on this web site properly segregates funds as well. Risk: Each firm will compete in ways they see fit. If you're happy with a firm whose client base requires the barest of margins, great - go put your capital with them. I personally know some traders left holding the bag when a clearing firm went under in London. One client blew out and took all the other clients down with them. Firms requiring full or now 50% margin (which you seem to believe is too high) have nothing - repeat nothing - to do with taking advantage of the client. It has to do with managing risk. The beauty of this business is that you have a choice. If you believe you have a better deal at broker A over broker B, no one is stopping you from using Broker A.
Def, You mean to tell me that clients accounts are not protected? I thought by law (here's that phrase again) they were SIPC (or some other insurance) protected in the US? Am I wrong? dow
You extract a phrase out of it context: I didn't confuse. I give an illustration of where the brokers interest are and that the deposit just fit in this global interest scheme. Interest and not moral are rational reasons at least statistically, I don't mean that some particular broker has not sincere devotion for their clients or that even the majority are crooks, I mean it is just normal interests. Now deposit like fees are not very important if you trade on high scales but if you trade on lower scales and that you compete directly with market makers then it is important, because on lower scales your benefits come from high probability trades but low gain so it is the number of lots that compensate the low gain. So don't talk in general cases either. If you are obliged to count on your broker to know the bet needed for each of your trade, well you just shouldn't trade at all. So if we are in a supposed free market let's people decide what is suitable : we are sure then that the brokers can't pretext our interest whereas it is rather their interests. As usual pretexting public interest is just a fake especially in this business field.
SIPC does not cover Commodities accounts nor do I know of any insurance companies that cover commodities accounts. IB is a bit unique in that it sweeps excess overnight funds into a securities account so excess funds are covered by SIPC and additional insurance. Harry, this thread is about futures and we are talking about most retail traders who are not using futures to hedge their equity or options portfolio (SPAN margining takes options into account anyway). Unless you are doing arbitrage or spreads, where is there a high probability futures trade?
I use them also and am very happy. They keep a close eye on acounts that get to close to the limit. I have to say that the other day I was not having a good day and threw my rules out of the window and started to trade eraticly. I got close to my limit and they blocked my account from trading. I called to thank them for doing so and was able to come back and trade with a more level head and gained back all my losses. So they do have security set ups to protect both clients and themselves. If you do not have a stop and are getting close to loosing your account they will put a stop in themselves. thus keeping you and them alive. Some may not like that but belive it is a good thing secially for the unexperience trader. To each its own.
Let me ask you all question about Global. The minimum to open an account is 2k, and the daytrading margin on ES and NQ is $500, but how muckh must be maintained? In other words can a 2k account fall to 1k and still be allowed to trade? I'm setting up a few accounts for friends, and 2k is the most they can (or will!) put up. I trade at IB where I'm very happy, but I would not be able to initiate a trade for them at IB if they fell under 2k, meaning I could never have a drawdown. I'm only going to trade 1 lots for each account so I'm not as concerned about the low daytrade margin as I am about how much they need to maintain. I've thought about just grouping them in a LLC but it's hardly worth the expense and bother for several thousand dollars.
When the account falls below $1,000 it is frozen until the balance is brought up to $2,000. I know this for a fact, since once upon a time I had just that sort of thing happen to me! Cheer, kp
I spoke to my broker and he said that you can trade as long as you have at least $500. If it drops below this, he added, you can trade things that are less. I thought that was a reckless thing to say but that's what he said. Perhaps, brokers and their compliance dept follow different paths.
Just in case anyone cares, they quoted $4.50 RT for a 25k minimum account when I mentioned I was using IB at 4.80. Also, the larger the account and more activity, you could basically name your price. Pretty nice if you really wanted to trade 50 contracts.