From what i understand there are not currently any FCM's but on the last educational webinar I was on where one of their reps was talking they had they mentioned in the next 60-90 days they should have FCM's (brokers) that should allow non-US residents to signup. Something about backend software and risk management integration or something.... Unfortunately, I've heard that for a while though so not sure what the real time line is. What I do know from another trader who confirmed this with nadex is that if you want to go through the trouble you could open a US LLC ie in Nevada or Wyoming or Delaware get a Federal ID number for it and get a US bank account and you could then trade on the entities behalf. I'm sure that would cost a bit and then you have to deal with US paperwork etc.. so not sure if its worth it to you depending on the account size you have. If you want to go this route i would call them up or email them and get the specifics first. Sorry I wish I had better news. If I find out differently I will be sure to post it here.
Yeah that whole MFG and PFG thing was rough for the futures industry as a whole traders, brokers, CME, ICE, Nadex etc... I used to have an account at MFG but closed it about a year before they went bust to switch to AMP for better rates but I know multiple traders that where no so fortunate. Hopefully the new regulations will prevent that from happening again. From what I understand from what they have said wont have to do the entity thing with the FCM's coming on soon just with direct member access which is supposed to be one of the benefits. I guess we will find out how it all works when they come out. I definitely took home the lesson from that whole MFG and PFG fiasco to make withdrawals and only keep in my account what I need to trade at any broker. (ie i don't build up my broker account to feel good - make money and make withdrawal) I trade fx with fxcm and futures with AMP using ninjatrader and options using think or swim obviously binaries and spreads at nadex but as stated I only keep there what I need for margin and drawdowns etc...
You cannot compete against the Nadex house Market Maker. The house MM is not paying the commissions that you have to pay. Even if you can get a discount it will never be to zero like the house MM. Then there is also the fact that the house MM is most probably 'colocated' with the matching engine. Retail traders are easy pickings for the likes of IG and Nadex, they really dont want any competition, not that you could compete with them anyway.
Agree with you yes ofcourse you cant as a retail trader compete with the DMM , same goes with futures market makers , you cant compete with them , they don't pay the commission you pay nor they use they use the same technologies that we do , the point was Nadex is an exchange .
Why is this the point? MMs are under contract with the exchange to take the other side of your trades. The point is that they are one big gambling house that you are trading against. Exchange makes money on commissions, MMs make money on the bid/ask spreads.
Same goes with the CME and CBOE , MM have contracts with the exchange , an exchange is not a house , if you have the ability you can become a MM as well , and as a retail trader you are already allowed to bid and offer and trade inside the spread with other traders ...
So looks like a few topics: Do fees of an exchange and bid/ask spread of market makers, and market makers paying less or no fees make trading on any exchange gambling? Gkishot....Agreed, whether it be CME, CBOE, Nadex etc.. exchanges make fees and market makers make bid ask spreads. Though to say that there are fees for doing business does not make that business gambling. Lack of risk/reward measurments, lack of statistics, lack of a business/trading plan etc.. are what lead to gambling. Total side note.. but Phil Helmeuth is a professional poker player who has one 13 world series of poker championships. That was not done by gambling luck. Are there poker gamblers? Yes of course most in fact we would agree are. But how is he not and they are. He knows how to read the players (markets), has a system (on a pair of 7 and > i will stay in before the river drops) [enter when this happens exit when this happens etc..], knows statistics based on cards in his hand and those showing (probabilities etc..), and money management such as only go to a table on limit with 20x the limit amount of cash at hand (risk management profit management). The casino getting a fee and a piece of every pot and tips to the dealer etc... do add up but they intand of themselves are cost they do not make it gambling. Trading on anything is gambling without the proper plan in place and with it pushes you closer to being a professional trader. Does a market makers existence mean they are in competition with you or do they help you? As stated Market makers have a contractual obligation to make a market. This is a good thing as a trader as I want liquidity so i want market makers to help ensure that liquidity. This is simply how markets work. Market makers are not there to compete they are there to make a liquid market and are seeking the compensation of bid/ask spread for doing so. If I don't like the bid/offer etc.. like Surprise stated I can place a trade inside the bid/offer and make my own market becoming the best bid and or offer or just stand aside its up to me to choose if it is acceptable for me. Market makers are not there to "trade" against you (unless it is a OTC non exchange based market maker where an exchange is not providing anonymity and transparency of pricing). Market makers want bid ask spread not be delta long/short etc.. Their function is liquidity. Though none of us like paying bid/ask spread fees etc... we do want liquidity and do want an exchange so that is just part of the cost of the trading business whether it be futures options nadex whatever Since Nadex is an exchange you if you have sufficient capital and are willing and able to make a market then as stated on their site you can become a market maker as well. Even if a market was trading against you they have to be right also. But the bottom line is a market maker while adding to your cost of doing business is providing a service of liquidity for you to get filled on a trade and, if not OTC based, is not someone who is trading against you but helping you. Does a market maker, or big firms, or trader co location on any exchange (cme, cbot, nadex or whatever) mean all the cards are stacked against you and its one big gambling machine as your just not going to be able to do trades fast enough to be profitable. Though I guess one could make some arguments on technology. Consider do you use the same technology as big HFT firms do on CME etc..? Personally I don't I use ninjatrader with AMP on my PC. I have a powerful PC but it does not compare to their technology. So for me just like it does not make an argument for me to not trade futures I would think the same applies to me trading Nadex. I guess that comes down to your trading strategy and how many ticks your going for. From what I get the only reason to do collocation is for 1 or 2 tick scalping, maybe a faster fill, HFT etc.. But I'm not trying to scalp a tick out of a contract on Nadex or really any derivative style option for that matter and execution speed has not been a problem for me in live trading, just speaking from my experience. But collocation is not really something that I'm worried about. the cost and edge are not worth it personally to me on futures etc... On Nadex The least I am going for is usually $15 after bid/ask spread etc.. which on many contracts only takes about 5 to 10 ticks. If i can't get my price i want i don't take the trade. If i don't like the bid/offer I don't take the trade. Does an exchange charging fees for doing business, cme bot, nadex or otherwise, by providing a place where buyers and sellers can come together and to cover their cost of doing business and cost of expansion to bring more traders to the market to further increase liquidity, AND/OR does a larger trader or market maker on the other side paying lower or no fees, make trading gambling and/or stack everything against you so its difficult or impossible to be profitable? In any business you should expect to have fees. Trading is no different. Regarding fees etc.. whatever the amount they do or don't pay is really is not the point as on any market there is a a bigger trader than me with bigger size paying less or maybe in some cases no fees. The point is are the fees on any trading instrument acceptable for my trading strategy. On futures I pay $5.00 a round turn. On equity options i pay less than $1.00 a contract and it goes down as my volume goes up. On Nadex binaries and spreads I pay .90 a contract and it caps at $9.00 per order. Whether it be futures, options, or nadex binaries or spreads these fees work with my trading model and strategy as acceptable cost of business. Depending on your trading strategy and risk reward model etc.. you have to judge if the cost of doing business works with your trading strategies. Bottom Line I guess it just comes down to you can find a good or bad on anything but what matters is how does it really impact your trading in live trading with actual trading experience on that instrument. I personally trade nadex everyday. I'm speaking from trading experience with the specific Nadex binary and spread instruments and drawing on what i have learned over the years about exchanges, market makers, etc.... Obviously, as im sure my answer show, Im not an expert in all this HFT colo stuff etc.., but hopefully this helps some.
The facts are that the Nadex binaries have lousy markets when compared to ETF verticals. The size indications are crap as well. Avoid. Here's a snapshot with ES at 48.25x50 with 90 mins to close.
Im not sure what you mean by lousy markets. Im guessing your referring to size or maybe pricing model? The fact presented is out of context. The facts are the size is larger on Nadex when expiration are lined up (ie comparing ETF verticals that expire friday with binaries on nadex that expire friday) and the risk is lower and delta and gamma are higher. Pricing Model is Different? I think there may be a pricing model misunderstanding and maybe that is why are you comparing a ETF verticals to a binary. That does not make sense. they are two completely different instruments. As explained earlier binaries are a delta derivative. You take the delta of a call expiring at the same date/time with same strike using a black scholes model and that is the price of a binary. The gamma will also apply from the call to the binary. I get the misunderstanding. I avoided them for the first 18 months i traded nadex and only did the spreads as i could not figure out where the pricing came from. But you are comparing apples to oranges using the wrong pricing model. Here is an example i posted earlier in this thread of showing call delta to binary pricing to visually show you how it works. http://content.screencast.com/users...35-4a0c-a4b7-fbec800d4cc8/2014-02-03_1516.png (Note they are based on ES not SPY so you would need to look at ES call delta to line it up.) Your size being low is inaccurate Regarding size on the demo platform screenshot you are looking at a intraday expiration which will by nature have lower volume and therefore lower bid/ask size (not an indicator this is showing the current liquidity for that second at that price- if you take out the liquidity it is refilled shortly thereafter) . So yes totally intraday will have maybe 40 contracts at any given second available. Maybe you want to do 100's at a time if so then yes that will be a problem? But if 10, 20, 30 etc.. is good for you at once then that should not be a problem. But you can also move to daily and weeklies for more volume. For instance we could look at dailies Here is one on the dailies on the same instrument you chose which have more volume and liquidity showing 250 on first level and if you open the ticket you see second level at 200. Though honestly i trade a lot of intradays. Im not outrading the market but i do trade them and if i am doing 10 contacts and I make $20 that is a $200 profit. on a trade in less than 2 hours.. but that is beside the point. http://screencast.com/t/5fQ2iia5LBkU Daily To get a apples to apples comparison on size (though pricing model is different) we would need to compare expiration times being this Friday. This screenshot shows the liquidity bid/ask size is even higher at 500 on level 1 and 50 on level 2 on weeklies (weeklies better line up with SPY ETF's with the weekly expiration to compare bid/ask size. http://screencast.com/t/fog47QNP Weekly Though comparing them to ETF verticals is not really valid as they are priced differently. compare the screenshot above with the SPY ETF verticals most with less than 550 http://screencast.com/t/vM0konwIhN Also note the horribly low delta and gamma on the ETF verticals and you have limited trading hours versus being able to trade at night etc..Though i usually focus more on fx at night. More accurate comparison: If you want a better comparison a apples to apples comparison. You would be better suited comparing a call to a Nadex spread (For accuracy mainly on friday as the spreads only have daily or intraday expirations) looking at Friday expiration. Ideally look at ES Options not SPY to get the same 4:15 expiration and to line up the strikes with the same instrument as its a derivative of the ES. And the spreads have the EXACT same black scholes model used on call/put options. The risk is the same (so long as you equalize risk (ie 5 spreads = 1 ES - 1 ES option contract includes 50 options - so compare the risk on friday same expiration same time to 5 US 500 spreads and 1 ES option. the risk will line up (nadex is priced in ES + risk versus options just being priced in risk - the net result is the same its just 2 ways of showing the same data). To be fair... Now I will definitely admit the spreads may have say 50 contracts size (again that is just for that second of best price fill at that size) but that would be like doing 10 ES contracts. Also they have about the same volume on 23 hour, 8 hour and 2 hour contracts. Now if your flipping 20/40 ES contracts at a time... probably not the best choice for you till the size is larger. But if under 10 then should not be an issue. Its not one for me and i love the high delta and gamma (it like friday expiration options everyday). 5 US 500 Spreads = 10 SPY calls or 1 ES Call If you don't like them then of course you should not trade them. I personally don't trade ETF options as i am not a fan of the low delta gamma. Also personally i love to be flat at the end of the day I don't want to hold something overnight. But that is neither here nor there about preference of what you like or i like etc. but as you stated based on facts. Just if you think the size is the reason to avoid its good to look at the size in context of expiration. So factually the liquidity when compared to your instrument of choice the liquidity is higher on Nadex in most cases as shown from the screenshots above and the pricing model is accurate but is not the same as it is delta price model. This model gives me a variety of ways to trade trend, swing, neutral, breakout etc.. on one day short term time frames. Just trying to help I hope this makes sense? If not let me know. Great discussion Hoping we can get to some trading ideas or something like that to all benefit on it but I get its important to understand how the instrument works before going there.