As a former institutional floor trader I may be a biased towards brokers, in a negative way, because they were the bane of my existence. For nearly two decades, most of work time, and a good deal of my off time, was spent working with brokerages. I have talked with thousands of brokers calling in orders (this was before internet trading) and found most competent; but, a sizable percentage had no idea what they were doing and their miscues were a non-stop disaster. That being said, everyone needs a broker; so you should choose the best you can find.
E-mini trading is a relatively new phenomenon in futures trading, with the first contracts appearing in the late 90’s and really catching fire in the early 2000’s. Just the same we have seen some splashy failures at all levels of the futures industry in recent years. Of late(as a result of the splashy failures) the CFTC has increased its regulatory authority and due diligence to combat any further futures brokerage failures.
So, what would I look for in an e-mini trading broker?
· With the advances in trading platforms, data feeds and online trading your contact with the broker is going to be far less than the old “call the broker to place a trade” days. The only time you’re going to 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) Just the same, my broker was the fourth one I talked with when selecting an acceptable one. I wanted someone who seemed to have a genuine care for me, as a client, and was willing to spend a little time selling himself and his brokerage. If you are treated as a small-time potato when inquiring about an account, hang the phone up. There are plenty of conscientious individual brokers to work your account.
· I would also check the background of the brokerage. Some of the most popular firms are riddled with client service that is absolutely deplorable. Check their compliance history. You can start with the Commodities Futures Trading Corp. and the internet. I would discount the sour grapes posts many failed traders circulate on the internet. Look at the actual complaint history of the brokerage and determine if it is circumspect. How many of the complaints were settled in the traders favor?
· Finally, I would inquire about the back office of the futures trading firm. Every brokerage clears through a clearinghouse. Without naming names, some of the clearinghouses are better than others. Some of the brokerages use data feeds that are technologically behind the times. Explore reviews on data feeds and decide which feed works with your trading platform.
· Finally, it is best to determine which trading platform you intend to use. I can say that I like NinjaTrader, but there are many other choices like Sierra, Trade Station, Open Outcry and Think or Swim. These are just some of the more popular platforms and many others exist that will work well. That being said, there are a plethora 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 free of charge to see if they are acceptable. Do it.
So, choosing a broker is more than just the individual, although I consider my relationship with my broker to be most important. But I have pointed out other factors like data feeds, trading platforms, and clearinghouse utilization to be other important factors. Take your time and choose wisely.