IB Changes Futures Pricing

FYI - From an IB

...Interactive Brokers is lowering commissions on US Futures and Futures Options. Effective April 12, 2010, you will be able to choose from two simple, low cost pricing plans:

Flat Rate USD 0.85 per contract, plus any exchange and regulatory fees.

Volume Tiered USD 0.25 - 0.85 per contract based on monthly trading volume, plus exchange, regulatory and carrying fees.

So the flat rate for an ES contract is $2 per side. Bundled is the same for <=1,000 contracts and then drops.

Jack

 

Commission is not much of an issue with me... I was okay with IB's commission as it was - lower is even better of course. However, they have tacked on a 10 cent "carrying charge" per night - not happy with that. Again, not much of a real difference to me, but I feel I will end up paying more overall.

From IB's website: "Carrying charges are applied for each net futures contract, net short call futures options, or net short put futures options on a single underlying for each business day the net futures position is held overnight."

I carry long / short on different equity futures on globex (+ most of the time I am net short options too), and my cost of business just went up.

Anyone knows a broker with no carrying charge? I have account with TradeStation as well, and they also have that 10 cent charge - one of the many reasons they don't get much of my business.

edit Maybe, the carrying fee is not applicable if I stay on unbundled - see link. If that is true, I go from 4.80 r/t to (0.85 + 1.14) * 2 = 3.98 r/t Even if carrying fee applies, that finances 8 days of holding, and my net hold is shorter than that - so yay!

 

The way I read the carrying fee, it applies to the volume tiered pricing and not the flat rate pricing.

 

You left out the $.01 regulatory fee, which brings your total up to $4.00. It looks like the bundled and unbundled will be the same for contracts under 1000, except for the $.10 overnight fee. By the way, that overnight fee has been around since they started the unbundled plan several years back. In this case though, if you're trading under 1000 it looks like there is no advantage to the unbundled plan.

OldTrader

 

That should be if you're trading less than 1001

My original post is correct.

Jack

 

Well yeah, Jack, it's true...kinda splitting hairs though. That extra contract on the unbundled plan is going to save you $.20 in execution and clearing costs. Of course there's always the the $.10 overnight fee. So the reality is that whether it was 1000 or 1001 it doesn't make much difference. It would be more important to understand how many of the contracts were overnight contracts unless your volume substantially exceeds 1000.

OldTrader

 

I have been pointing out for years that IB's futures commissions were too high. IB must be losing too much futures business to other lower cost brokers. They only cut the commissions on the first 1000 sides and by too little. Better than nothing, but they should have been much more aggressive and made a cut in every commission tier.

Now it is going to be many more years before they recognize that their futures commission are still too high. IB has the lowest costs of any futures broker and a very high profit margin (about 50%) and still refuses to compete on price for futures business.

For high volume traders a broker like Advantage Futures blows away IB on commissions.

 

But do you get the security with advantage that you get with IB?

I feel like my money is safe with IB, execution is fast, and I've never had a problem with the platform in years.

I would say the futures brokers like infinity, amp, global and these types are going to be under some pressure though, now that they're more expensive than IB.

 

This is a welcomed change from IB. While not as low cost as some of the competition, it puts IB futures commissions back in line with most of the popular futures brokers. For me, about all IB needs to add is some limited form of secure client check writing privileges to my account.

 

I also would have liked a bigger cut. But, they did make a small cut in the effective rate in the other tiers. The price you pay as your volume goes up is an average of all the tiers. Thus, the $0.35 a drop per side at the lower volume levels is rolled into the higher levels.

It is not much - you pay about $1.83 a side (average) if you trade 6500 contracts and about $1.75 at the 15000 level. About a 3 - 4 cent a side improvement.

Just remember - they probably reduced their customer service budget to lower the rates. Any bigger cut might have had a very major impact in customer service.

Jack