Rebate trading is a bait for suckers. You get rebates until they figure out how to screw you big time. Then one day you lose the paid rebates plus your account. No sane trader would add liquidity. Adding liquidity is like a sitting duck. Sooner or later they will get you. Winners remove liquidity, they take profits, hit and run. Rebates are for the doormen, the tip for parking the car and carrying the laundry.
Sorry if it should be obvious from context, but would you mind clarifying who you're referring to as "they" in the above?
What if your system is adding liquidity by placing pending orders instead of market, 90% of times? Hit and run... needs also more clarification because sometimes you might hit but you could not run. By "They" also
depends if you like hitting home runs or singles, at the end of the season its the batting avg that matters not the number of home runs....
I do not think so. I know some good traders. I met them in one of SwiftTrade suboffce where I also started my trading carrer. They are trading for 6 years using this `method` with stable monthly P/L, for now avg. $8k where about 50% of profits are ECN rabates. 2,3,4 years ago their profits were higher($10k-$18k) `cos there was not many AT machines and dark pools. They trade mostly on takeovers, mergers, public offerings and stocks like SIRI, BAC, etc + TSX/TSXV or if there is an occasion on `normal` stock. Furthermore it is obvious that sometimes u will be screw by a bigger fish. It is normal - it is market. What`s important they using this method for a long time and it gives stable results. greetings
Don seems like a standup guy and from what I remember they are clearing Goldman??? (i could be wrong) and GS is a little more expensive to clear than some of the cheaper places on the street. I don't know what the rates are these days but I know that as of a few months ago 3-4 different prop firms in NYC are paying around 14-16c per 1000 shares (or $0.00014-$0.00016 per share). I also know that prop firms will never tell you what they pay because they do mark up trading & execution costs for traders as well as take splits from trader's P&L. It is what it is - if you can't afford to self capitalize you'll end up paying for the leverage that a prop firm gives you. I'm still a firm believer that if a prop firm is going to take your P&L (like an 80/20 split) they should be allowing you to trade at their costs. It's pretty below the belt IMO to take a trader's P&L and mark up trading costs on them. On the other side of the coin - remember that it costs money to operate a prop firm and if they let everyone clear at their rates there would be no way to pay the bills & keep the lights on. They have to either mark up or take a P&L split or they would go out of business. I just think that if a trader is doing reasonable volume he or she shouldn't be gouged by their prop firm. Either mark up their rates or take their P&L but not both. A prop firm is a customer just like an individual with capital could be. A prop firm's rates are usually low because they face the clearing broker as one unit and combine all the volume of each trader in their firm. All that matters is the volume that the prop firm can hand off to the clearing firm. So the prop firms may be marking up the lower volume and overnight guys - but they are still paying one rate back to their clearing broker. I don't know anything about that. You could try Interactive Brokers, I think they allow for foreign investors of some types. You could also form a business with your 5-10 guys (or girls) and then face any US prop firm or retail shop that way. You would have to talk to an attorney on how to set it up. Combining equities, options and futures would be tough. You would either need a place like Interactive Brokers (expensive) or you would need the capital to be able to set up accounts at a few different places or become members of a few different exchanges. If you are really interested in setting something up like that send me a PM. I can at least point you in the right direction. Also don't forget that options and futures rates are different than equity rates. I have to somewhat disagree with you. It's true that when adding liquidity most of the time you are on the wrong side of the trade however there are a lot of solid traders who have a rebate or credit trading strategy as part of their overall portfolio. I even know guys who run rebate trading strategies that make $0 overall but it bumps their volume which gives them lower overall rates. If you are playing the rebate game on a few stocks that's one thing but if you are quoting an entire market (for example every listed NYSE stock) that is assuming a lot of risk and takes capital. Most of the guys that I know who are quoting 1500-5000 stocks (100 shares each) are expecting to be on the wrong side of the trade at least 50% of the time. As long as their P&L makes $0 they make their money purely on the rebates.
Typically rebate traders play in highly liquid stocks. The y stay on the bid side or the offer side, never reaching across the market. They make virtually no money in P/L, Just rebates for remaining passive. Keep in mind that these stocks have hundreds of thousands of shares at every single price point. Tons of shares may trade and you may not get an execution if you are at the back of the line. If you are going to be a big player, you may want to use an Agency Execution firm as they can have "Parity" with the orders queud up on the book. That way if a ton of stock trades at a price where you have an order, you will get your fair share.