October 2016
A discussion with Margie DeLorme, Advantage Futures, Vice President Compliance and Membership Coordinator
Traders focus on trading and often have less time to research the nuances of exchange membership guidelines and fee incentive programs. Understanding which opportunities make sense for your trading style and volume can be a challenge. Although most futures exchanges have detailed information on their websites, wading through text to make an informed decision remains difficult. After you decide which category or programs make sense for you, the application process can be laborious.
Margie DeLorme works closely with Advantage clients and futures exchanges throughout the membership process. Margie joined Advantage in 2008 and has 24 years industry experience. We asked her about the most common questions regarding membership and incentive programs.
Q: WHY WOULD A TRADER INQUIRE ABOUT MEMBERSHIP OPTIONS?
Exchange memberships enable clients to trade specific products for reduced clearing and exchange fees. Greater volume increases the savings from these reduced fees. Memberships can be purchased or leased. Traders of multiple products may require multiple memberships in order to receive the most advantageous clearing and exchange fees.
Q: HOW DO YOU FACILITATE THE PROCESS?
I consult with current and prospective clients helping them determine the most beneficial options. Consultation involves:
Review of trading activity
Assist with application forms and accompaniments
Act as a qualifying firm for membership ownership
Coordinate seat lease agreements and renewal process
Facilitate bid and offer process
Liaise between client and bank to secure seat loans
Process lease documents and monthly payments
I work with clients to resolve any issues or deficiencies in the application and answer exchange questions.. When membership is approved, I secure and transfer seat information to the exchange and implement discounted fees.
Q: HOW LONG IS THE APPROVAL PROCESS ONCE AN APPLICATION IS SUBMITTED?
The approval process of individual member applicants trading electronically is three to five business days. For individual member applicants seeking floor access, timing is two to four weeks. This includes registration with NFA and orientation class with the exchange. Corporate memberships average six to twelve weeks because they are more involved than other member classes.
Q: WHAT ARE THE APPLICATION FEES FOR MEMBERSHIP?
The CME member application fee is $2,000. If a trader applies for multiple exchange memberships, additional application costs are discounted $1,000 per exchange. Fees are paid directly to the exchange. There is no charge by Advantage as my assistance is part of our client service.
Q: WHICH EXCHANGES OFFER MEMBERSHIPS?
The Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), New York Mercantile Exchange (NYMEX), Commodity Exchange, Inc. (COMEX) and Minneapolis Grain Exchange (MGEX) offer memberships. CBOE Futures Exchange (CFE) does not offer membership but does offer trading privilege holder (TPH) which requires an application and approval process.
Q: IF A CLIENT NO LONGER USES THEIR SEAT(S) BUT DOES NOT WANT TO SELL, WHAT OPTIONS EXIST?
Leasing the seat is possible. I list client seats on the exchange website and facilitate the leasing process when there is an interested party.
Q: WHEN WOULD SOMEONE LEASE VERSUS BUY?
Each situation is different; purchased seats provide the owner equity member exchange/clearing fees which are the lowest. Some prefer leasing a seat. This requires less capital outlay than purchasing and also affords lower exchange/clearing fees compared with non-member rates.
Q: DO ALL EXCHANGES OFFER INCENTIVE PROGRAMS?
Many exchanges offer trader incentive programs to enhance liquidity and broaden market participation, enabling individual traders and members to benefit from reduced exchange/clearing fees. Because I monitor the various fee incentive programs, I am up to date with opportunities and available to discuss with clients.
For information on the programs contact Compliance@AdvantageFutures.com.
