New options for futures traders

Futures Magazine reports:

One of the more depressing trends in the futures industry during recent years has been the decline in futures commission merchants (FCM). While in the early part of this century the decline was more about consolidation and building economies of scale, in more recent years it has been about the ability to earn profits from futures brokerage with higher compliance and regulatory costs in an era of zero interest rates.

As of the Commodity Futures Trading Commission’s March FCM Data report, there were 70 FCMs listed. That is one more than the 69 listed the last time we presented our yearly Top Brokers feature (see “Top 30 Brokers: Mean, lean and ready for what comes next,” January 2016) highlighting the FCM world, but it did not include OptionsHouse, which has since expanded into futures and launched its FCM in April. We noted that the number of FCMs had shrunk from more than 180 in 2004 to its current sad state.

We spoke to Rick Tomsic, CEO of Tradovate, an innovative new firm with plans to launch an FCM in 2016. Tradovate’s FCM is registered and approved but launched in April as an introducing broker.

I’m not sure two new firms can be labeled a trend but the entry of OptionsHouse and Tradovate is a positive development for a sector that has been bereft of growth. Both firms target self-directed active traders and offer unique options.

Tradovate’s value proposition is centered on cloud-based technology that offers traders one place to fill their needs along with an innovative pricing model that will save active traders money over the traditional commission model.

“We felt like the fragmentation of most offerings today where you go to a software provider, then find a brokerage, then find an FCM — and each one of those firms have to make money — ultimately adds cost to the end users,” says Tradovate President Ryan Hansen. “Not only can we reduce that cost but also [improve] the customer experience. “

Tradovate offers an all-in monthly fee. Traders are charged one fee for unlimited trading between $39 and $139. The more expensive option includes exchange data and the ability to trade multiple accounts.

Hansen says, “Unlike a traditional broker or FCM the thing that matters to their profitability is number of trades, and in our model the customer is equal, whether they trade a lot or a little they are still considered to have the same value in our firm.”

An article well worth your time.