Futures: How To Choose A Safe Broker?

Discussion in 'Index Futures' started by Aranha, Sep 27, 2002.

  1. Aranha


    Dear friends,

    I have realized that there are so many firms offering futures trading, that makes me confused.

    Some people tell not to trade with firms that are not associated with the NFA, other tell me a different association. Some people tell that the clearing firm is what matters.... So, what does "really" matters?

    What associations a firm should have to be considered a "SAFE" one?

    Is there a list of firms that are associated with the NFA or other important association?

    Looking forward to hear your opinions.


  2. Being registered in NFA doesn't really matter. Firms that are bad are bad no matter what.

    What I'll do is look are a discount broker and purchase some newsletter service unaffiliated with the broker. It's a lot cheaper and you'll get better service.

    Broker's recommendation just sucks. I know a few guys who are brokers but they are good salesman but they have no idea about trading. If the brokers can trade, they will be trading to start off with. I can say this with 99.99999% with the brokers. Brokers recommendations are just to make you trade, not to make you money.

    I trade for a firm so I'm sure which broker but, restart a thread asking for good newsletter service and low commission and fast fill.
  3. Aranha


    DEar WDGann,

    Thanks for your post. So NFA doesn't really matter, huh? Didn't know that. :)

    What about the clearing service? Which ones are trustable? Which ones are not?


  4. Your money is with the FCM. All FCM's have to meet minimum capital requirement. All FCM's are safe until they go broke. You never know when am FCM is going to go broke. It is very rare.
    FCM's go broke when someone starts trading the firms money. As far as risks in trading futures go, the risk of the FCM going broke is infintesimal compared to the risk of you the trader going broke.
    You can only worry about so much, and there are many more dire possibilities to worry about.
    There are really only a very few FCM's that clear for retail customers, so your list to research will be very small.
  5. good point profitseer. There is nothing to being an NFA member just a couple of fingerprints an applidation fee. It is like saying I have 2 eyes and a nose. Go to cftc.org and check out broker for disciplnary actions. Also in that site is the report that shows net capital requirements vs. segregated funds for customers. Risk of blowing yourself up is realy much higher than broker going under. Good luck
  6. Aranha


    So, trading with firms like Advanced futures, E-local... is a big risk?

    If so, how to manage this risk? Example: every profit you make, you tranfer to you bank...or something like that...


  7. acrary


    If you're concerned about the FCM possibly going under with your money, try to keep as much of it as possible in T-Bills. The T-Bills are required to be on deposit with the Clearinghouse. There's virtually no chance you'll lose any part of those funds. Cash accounts at FCM's are always considered "at risk" and are usually lost if the FCM goes under.
  8. Any firm is a risk BUT some are worse than others

    ex. SLK a/o Sept 02 has over $1B in excess capital vs. customer seg account of 196M so 196/1B is .1865 another broker has $4M in excess capital with customers $ at 80M for a ratio of 25 Who is safer? Get the picture?

    AGAIN you would probably blow up before your broker.

    check the cftc.org
  9. No, I never said any particular firm was a risk. All firms are equally risky and some are less risky than others. The money in your account is your trading capital. It is always at risk whether it is being used on a trade or just sitting there.

    There is no SIPC protection in the futures market. It is a risky business.

    The new Universal Accounts may offer some protection that was in the past too inconvenient to make use of. That's a good question. I'll have to look into that.

    Anybody know? If you are trading futures in a Universal Account, does cash reside on the SIPC protected side?
  10. Aranha


    Do you guys consider a risk to trade with firms like Advanced Futures or E-local?

    Of course, the risk is aways present, but what about those other option I was told, like to withdraw your profits as soon as you gain them....?
    #10     Sep 27, 2002