Understanding Brokers Commissions

Discussion in 'Index Futures' started by DblArrow, Mar 21, 2002.

  1. DblArrow


    I am trying to understand broker commissions, and I am not sure if my current broker is being straight with me.

    The commission fee, i.e. $22 rnd; not including the exchange fees and various other fees - does the broker receive this full amount or a portion of this and the FCM a portion.

    Does a broker need to negotiate commission fees with the FCM? i.e. ask their permission, based on volume or whatever, to lower his cost of commissions to me?

    What about A/C/E fees? Is this a nonnegotiable fee?

    This is the situation:

    Was paying $22, talked with broker about fees, because I can get half that at a number of different places. Had $11 for the last 1 1/2 weeks. Today he tells me he is losing $3 per contract that I trade! How does this work? I also recieve a $5 perside fee for the ACE.

    How can places like IB and Net futures and IRA Epstein and Expressfutures all charge under $10 including fees? My charge for using A/C/E alone!! :mad:

    I answered a thread about commissions previously but now I question what understanding I thought I had!

    It is a small town independent broker clearing through RJObrien. I don't begrudge the man charging a decent (for him) commission, I just wish to understand how the system works a little better.:(

    Any and all input is greatly appreciated!

    Just had one more thought that really puzzles me:

    Current cost to trade the ACE; NOT including commissions; Fees only- $18.2 rnd turn
    ExpressFutures to trade the ACE; not including commissions; Fees only- $.08 rnd turn

  2. Yaz


    Others on ET can discuss the intricacies of FCM's and commission/fee negotiations better than I. But it sounds to me like your guy just needs or wants the higher rate. Better to just yank your account and go someplace else, like the web-brokers you mentioned, rather than deal with "its $11 RT this week...$22 RT next week" from the current broker, unless he's offering you service or advice that's worth the extra $$ and hassles. Just my opinion.
  3. stevet


    If you broker was losing money on each of your trades - he would have to be one dum schmuck to keep doing trades for you

    The reason that brokers will say they are losing money is that in their calcualtion for break even charges to customers - they will factor in all the costs of their business model into the breakeven - so if the broker is taking a salary of a million dollars - he will estimate based on the average number of trades in a year - how much he needs to make on each trade - to break even

    So, the answer is to find a broker is lives in the real world, and is aggressively seeking new clients by providing the best rates and the best service so as to increase the divisor or their costs and therefore lower their breakeven per trade

    And if you think you have problems in the US, if you were in the UK, you would really pull you hair out.