As a former institutional floor operator, I may have a bias towards brokers, in a negative way, because they were the nightmare of my existence. For nearly two decades, most of my work time and much of my free time was spent working with brokerages. I have spoken with thousands of brokers who place orders (this was before internet trading) and found the most competent ones; but, a considerable percentage had no idea what they were doing and their mistakes were a continuous disaster. That said, everyone needs a broker; so you should choose the best you can find.
E-mini e-commerce is a relatively new phenomenon in futures trading, with the first contracts appearing in the late 90’s and actually catching fire in the early 2000’s. Anyway, we’ve seen some conspicuous failures across the board. industry levels of the future in recent years. Lately (as a result of the conspicuous failures), the CFTC has increased its regulatory authority and due diligence to combat any future brokerage failures.
So what would you look for in an e-mini trading broker?
· With the advancements in trading platforms, data sources and online trading, your contact with the broker will be much less than the old days of “calling the broker to place a trade”. The only time you will have serious contact with your broker is when you set up your account and if you have a trading malfunction. (good luck with that, by the way) Anyway, my broker was the room I spoke to when selecting an acceptable one. I wanted someone who seemed to genuinely care for me, as a client, and who was willing to spend a little time selling himself and his brokerage. If you are treated like a petty potato when asking about a bill, hang up the phone. There are many conscientious individual brokers to work with on your account.
· I would also check the background of the brokerage. Some of the more popular firms are plagued with customer service that is absolutely deplorable. Check your compliance history. You can start with Commodities Futures Trading Corp. and the internet. I would discount the bitter grape posts that many failed merchants circulate on the internet. Look at the brokerage’s actual complaint history and determine if it is prudent. How many of the complaints were resolved in favor of the merchants?
· Lastly, I would like to ask about the back office of the futures trading company. Each brokerage goes through a clearing house. Without naming names, some clearinghouses are better than others. Some of the brokerages use data sources that are technologically out of date. Explore data feed reviews and decide which feed works with your trading platform.
Lastly, it is best to determine which trading platform you intend to use. I can say that I like NinjaTrader, but there are many other options like Sierra, Trade Station, Open Outcry, and Think or Swim. These are just a few of the more popular platforms, and there are plenty of others that will work just fine. With that said, there are a host of trading platforms that are completely unacceptable for futures trading. Some have made me scratch my head in bewilderment and ask, “Can these people be serious?” You can demo most platforms for free to see if they are acceptable. Should.
Therefore, choosing a broker is more than just an individual, although I consider my relationship with my broker to be the most important thing. But I have pointed out that other factors such as data feed, trading platforms, and clearinghouse utilization are other important factors. Take your time and choose wisely.