I talked about this many years ago and all I got from fellow retailer forum members was that I do not know what I was talking about. It involved a conversation in which any retailer is fooling themself that they can trade like the pros (institutional traders) even with the latest fiber optic cable lines. Those guys have services that are not bottled whereas us retailers are bottled. I even talked to data vendors and brokerage firms that I had accounts...once again...I was told I don't know what I was talking about. It's my illusion as one broker told me. Guess what, its not just the exchanges doing thus "throttle" (bottle) of the data...the ISPs providers do the same damn thing. Retailers that one day want to trade...they better have a lot of throw away money because that window as a small account retail trader is closing fast wrbtrader
I agree completely if that retail trader’s strategy is scalping. Scalping modern electronic markets IMO is probably not the optimum strategy for modest retail oriented traders. I’ve long proposed that modest retail traders would have better risk/reward swing trading or position trading because it mitigates the ECN latency disadvantage. And if that means trading very modest lots of SPY shares or QM in lieu of ES then so be it. You do what you have to do. Once you build consistency you lever.
BUT IT'S NOT commiserate WITH THE RISK. That's the entire issue in a nutshell. The fees are high, the risk is high. Should be : high risk, low fees. It's backwards right now to the CME's distinct advantage. They know that and the CFTC is too stupid to recognize this. OMG: How many stupid government agencies are there ?
That is thanks to the Exchange Fees which give a distinct advantage to the exchange members....who pay litte-to-no fees. I do 60-100 contracts per day and must pay +$100 PER DAY in exchange fees alone....and then add the brokerage commission. This is ridiculous. The exchange fee should be less than the commission cost....BUT IT IS NOT.
The CFTC doesn’t set exchange fees - the CME does. $50 x 3023.00 = $151,150 notional value on today’s ES closing Mark. If it’s cheaper for you to trade SPY or a basket of shares then by all means avail yourself. If the notional values of futures versus underlying are equalized then the risk is the same btw. Nobody’s forcing you to trade ES. Last time I checked, the Nikkei futures, the FTSE futures, and the Dow Jones Euro Stoxx futures had similar cost structures for retail traders. The CME is in business to make money for their shareholders. And my guess is that if it were cheaper to trade notionally equivalent SPY then CME would have to reduce their pricing.
I don't want to trade SPY...I would have to go with options to get the equivalent leverage of ES. Ah....so that's the key....the leverage. CME is exacting quite a premium for that "privilege". But where is the real competition ?...those other exchanges are just mimicking the CME....not competing with it.
So you pay an exchange fee of, oh, a buck 50 per contract to trade the ES, and that is excessive? How much money would you need in your account to trade the equivalent SPY for the same tick-value movement of the ES? I think paying a buck 50 to trade what you can is a small price to pay for the levered ability to even get into the thing. Yeah, it is a "privilege" to get that level up. It is an excessive fee to play like the big boys?
Indeed....yes it is. Should be a more discriminate fee schedule....monthly 0 to 2000 contracts, 2001-5000 contracts, etc. Right now you are hosed at the retail rate regardless of volume or you are an exchange member at near zero rates. Right now it's a binary option.
If you run the numbers - and you should, the transaction costs for a retail account trading ES futures versus an equivalent notional value of SPY are quite favorable. And there’s no Reg T margin requirements for futures. If your transaction costs comprise a significant percentage of your profits over a protracted period of time - then your trading system design should be objectively reviewed. I wish you good fortune !