Lease or Buy.

some Q & A:

1) can I have multiple people trading a sub-accounts of a master account which has membership?
2) How many CME memberships are available?
3) If I open up a company and apply does the membership fee change?
4) If I have a CME membership can I lease my seat?
5) If I have a seat that means I can trade on the floor, if so would I be able to trade on the floor if I am not a US citizen?

Sorry about all the questions, but I'm very interested on the business end of things.

Thanks.

ozzy <= business first trading second

 

1) Of course ozzy. I know many people who does this. They usually get a cut of the other people's profit as well. And the more contracts the group could trade per month, the more your RT commissions drop.

2) A membership is always available. It is based on a bid/ask system. There will most always a bid and ask for a membership and the availability is based upon who is willing to give in. For ex: right now, the BID for an IDEM membership is 10K while the ASK is 20K. If you want it right now, you can have it for 20K. But if you can wait on the line without a gurantee of it getting filled, then you can wait on the front of the line with a 11K BID.

3) Membership fee is the same for entities. Which includes individuals as well as companies.

4) Of course. Its like owning a house, when you don't live there anymore, you can either sell it or rent it to someone else.

5) You don't have to be a US citizen to trade on the floor.

Hope it helps.

 

In response to 5)

so they won't mind if I'm an Afghani Taliban with a turban and drapes for clothes?

ozzy

 

You will go through a rather extensive background check, and you will also have to have some "sponsors" from the exchange in your application for membership.

 

I read about the sponsor bit on the CME website. I wasn't groomed in this business. I consider myself a bit of an outsider since my backround is in Electrical Engineering.

How would I go about getting sponsored if no one knows me? Is sponsorship a necessity?

Thanks
oz

 

I would think very carefully before laying down your money for a CME seat. Prior to the IPO, a CME membership represented actual equity in the exchange in addition to special trading privileges. With the IPO, the equity part of the membership was stripped in the form of CME 'A' share, while the trading rights were reresented by ownership of CME 'B' shares.

So now when you buy a CME seat, you are actually buying the 'B' shares, which represent no equity in the exchange. So now a CME seat's value is derived from two things: the right to trade on the floor (irrelevant if you are an electronic trader), and exchange fee discounts.

You probably already know this, and it is the fee discounts you are after; but bear in mind that the exchange managment now represents the 'A' shareholders (not the seat holders) and is under no obligation to maintain the member fee discounts at their current levels. It is in fact contrary to shareholder interests to maintain any fee discount at all, so I would expect the spread between member and non-member rates to narrow over time (this has been the trend since the IPO).

So you might end up owning a $300,000 seat that gives you the right to a $0.00000001 discount under non-member rates.

 

Interesting. Thanks for the response, very much appreciated.

 

Beyond the lease fee are there any other monthly fees associated with a lease, not per trade fees, but any other monthly fees? From what I could figure there weren't any, but I'm not positive after reading through the material.
Thanks

 

Not monthly fees that are associated with a lease, but you will need to pay a "trade-checker" to handle/input your trades into the system.

 

Ok, maybe I miss understand, but I would still go through a broker and use my X-Trader, but would have the lower fees associated with a seat lease. I wouldn't need a trade checker then would I?