I'm considering leasing a seat at CME to reduce the commission. So I have a few questions for those who have experience. Would also like to hear from the brokers/sponsors as well. 1) Whether buying or leasing a membership, you need to pay $2,000 application fee. Suppose I want to buy my own seat at the end of the lease. Do I need to pay another application fee? 2) According to the CME website, you need to be approved as a "member" even if you're leasing, which sounds a bit oxymoron considering that you're merely borrowing another's license to trade. So, to the contrary to above, suppose I realize that leasing a seat doesn't provide as much benefit as I thought and I do not renew the lease. Would I be de-listed as a member? Would I then need to go through the same process again (and pay another application fee) if I were to return later? 3) Right now, I pay $5 for the CME data feed as a "non professional". Would my status be changed to "professional" with the lease? 4) According to CME fee schedule, individual members pay 9-cents per lot (see below). Is the commission same for both the seat-holder and the lessee? Also I currently pay 10-cents to CQG for every contract traded. Will this be waived? What would be the TOTAL commission? 5) Finally, how long does it take to sign up for the lease? Moreover, how long does it take after that to get your commission reduced from your broker? Regarding the broker, what's the procedure for reporting all this to your broker? Just fax the lease document?
Happy New Year @schizo ! Question #3 encompasses and leads to my own first-hand experience and knowledge. I'll leave the other questions to others rather than my "understanding" of the procedural questions you pose, since I have no direct experience leasing a seat. Yes, you (or your entity) will be considered a "professional". Additionally, as a "professional" you will be required to pay 15.3% SE(self-employment) tax in the USA, on the first 137,700 in 2020. (note: there are 2 pieces to SE tax... 12.4% for social security, and 2.9% Medicare, the SS component is maxed out at 137,700 in 2020). Since this is now about taxation, it is important to note that owning or leasing a seat DOES NOT magically create TTS (Trader Tax Status). To help explain here, trading other peoples money or offering advice or other services is not (necessarily) the same as a trading business and TTS may or may not offer tax advantage, whereas for trading only, TTS is as close to a necessity (from a US taxation viewpoint) as there is! You really need to run your numbers to determine if the initial and ongoing costs are worth it. Don't forget additional accounting, legal, and entity costs if appropriate. Quick tip... if as a trading business trading profits are less than 250-300K annual, a seat may not offer much. Btw, the FEES listed are only EXCHANGE FEES per side. All-in cost per side will be determined by your broker and/or FCM. HTH
@schizo we have helped a number of people over the years, and we make the process easy and we work with both the FCM and CME. Just to answer some of your questions: Yes, you will require an application for the lease, the CQG fees do not change and you be considered a pro for the market data. We work with FCMs where we make sure that the fee is applied right because they have a schedule based on your level of trading. https://optimusfutures.com/CME-Lease.php Would be happy to help
Thanks, but I thought it would be helpful to get some preliminary feedback from others before making the call. I wouldn't want them to think I was a noob.
Thanks for the info. Seriously, I haven't even considered the taxes yet. I'll be trading only my own money. You don't need to become a "professional" to be designated as TTS, right? Please provide more insight on taxes. Thanks.
Thanks Matt. Actually the link you gave was one of the first places I've visited when researching about membership info. LOL However, it doesn't address any of the questions I listed at the top of this thread. I would love to hear your opinions regarding those questions. Thanks.
Good morning schizo, You should either speak to your FCM rep or call the CME. If you only trade ES, there is a less expensive lease I think called IOM. I also believe you will not get that Individual Member Rate unless you buy a full seat. Matt responded to your other questions. One other advantage of leasing a seat is that you will no longer pay the NFA fee. Bob
There are different types of memberships/lease options. It will reduce your exchange fees per trade quite a bit but not down to 9 cents.... I agree the CME membership is not that self explanatory but based on your volume, specific markets you trade, if the account is individual or corporate account and other factors I will be happy to assist you and recommend the proper membership/possible lease set up. Normally I tell my clients that if they trade consistently above 2500 round turns per month, we should look into getting the membership. Feel free to PM me and hope 2020 is a great trading year for all!