Futures exchange fees

Discussion in 'Professional Trading' started by HBC, Sep 5, 2007.

  1. HBC



    I have 2 questions in regards to Futures exchange fees. Not sure which forum to raise my question, hope someone can help me out in here. Many thanks.

    1. Say for example, if my futures broker happened to be a clearing member at CME; when I trade throught them, does my broker pay exchange fees to CME at "member rate" while charging me at "non-member rate"?

    2. Can brokers pocket the difference? Are they required to declare the status of their clients, thus, paying at "non-member rate"?
  2. When you are making a trade in your account, then you as a non-member pay X. Your broker/FCM does not make a trade in your account; your broker/FCM facilitates a trade in your account. The fees that you see posted on an exchange's website for members/non-members/etc. are relative to the party making the trade, not the party facilitating the trade. If your broker/FCM were making a trade for its own account, then it would pay the member rate of Y.

    Your broker is free to charge you whatever it wants over and above the non-member exchange and NFA fees. You are free to negotiate or give your business to someone else.
  3. HBC


    Thanks, JangoFolly. So, am I right to say that FCMs who only facilitates trades and don't trade their own account probably would not bother to become an exchange member?

    Thanks again!!!!
  4. minmike


    I don't think you are. The clearing firm needs to be a member to "facilitate" your trades. A firm being a clearing member, is very different from a trader/trading firm being a member. Two completely different types of membership.
  5. No, FCMs are also called clearing members, and they are most definitely members of the exchange. This is a level of membership above and beyond a regular trading membership (although clearing members can also trade for their own accounts). An introducing broker is an example of a company that simply facilitates trades and is not necessarily an exchange member (i.e., they might be non-clearing members).

    Who do you think is screwing you, and how do you think they're doing it?
  6. FCM designation does not automatically mean the FCM is a clearing member.

    You don't need to believe me. Here's the link to the CME clearing members...
    Of course, an FCM doesn't have to be a clearing member of CME. Other exchanges provide similar listings of their clearing members.

  7. I believe you! I was incorrect on the FCMs. As you stated, they are not always clearing members.
  8. HBC


    Actually, I met an independent trader recently and he told me that his broker is offering him US$4 round trip on CME FX futures contracts without any committment to monthly turnover. I was shocked and suspicious of that. To certain extent, I believe in what he said because he actually hires 3 traders to trade his account. In finding out the truth, I looked up CME website and several FCMs' websites. Take "Tradestation.com" for example, the best rate they could offer to non-member is US$1.87 (again, CME FX), taking 1.62 (regulatory fee + exchange fee) into account, the broker is only left with 0.25 per contract. But please take note that not all transactions are 0.25, for the first 300 contracts, they are actually 1.2 each.

    If US$4 roundtrip was true, I wonder whether or not a broker(exchange member) is able to make money out of the difference in members and non-members rates.

    My understand is that when we are making a trade, the trade is ultimately passed onto a clearing member where it settles the trade with other clearing firms. What's bothering me is whether or not clearing firms clear all trades (prop trades and clients' trades) at Member's rate while charging retail traders at non-member rate.