Jump to content
Robert H

New Broker Announcement: CME Group

Robert H

Guys, thanks for all the useful information posted here about CME Group. Just a favor, we beg you not to post verbatim CMEG emails, just share their relevant communications in your own words. While we can discuss whether disclaimers in email signatures are legally meaningless or legally binding, we at BBT want to be respectful of those disclaimers.

Message added by Robert H

Recommended Posts

Hi Rob, thanks for your insight!

 

I guess I am the bearer of bad news on CMEG if this is true. I am not sure why they so drastically changed their margin rules...especially for a primarily day trader client base...and not informing their clients prior to system/rule updates is a separate issue all together.

 

As day traders we take large positions in a few or most of the time in a single stock, especially new traders as micro managing more than 1 trade at a time can be challenging.

Being an off-shore broker most of would not keep large cash amounts there so high margin usage is 'critical' to trade successfully and not over trade to make $50 a day. Over-trading to make up for the reduced buying power update can be a recipe for disaster.

 

So this new '2.5:1' margin coming from 6:1 margin and even their 4:1 (for under $2500) is quite a change in their approach. CMEG should strive to be better prepared to manage risk like their competitors SureTrader, IB, LightSpeed, etc. are. I am not promoting being a 100% 6:1 margin risk-taker...my approach is to not keep too much of my trading account overseas...so in the grand scheme I am not risking more than 1-2% of my total trading account per trade.

 

The above brokers do not have anywhere near as strict margin rules so unless your junior trading account has 10K in equity...which not many of us would like to keep more than that overseas...it may prove challenging to even make $100 a day with 2.5:1 margin. Just not what a new trader should be worrying about when they start off.

 

Also I am not going to get involved with the rules CMEG applied to lower priced stocks..under $5 because I usually don't trade those anyway nor with margin.

 

I did not inquire why they put these strict changes into effect but being such a young firm risk may need to be more stringent than larger more mature brokerages. It could be because some new traders took on huge short positions that brought them into the red and now they owe their broker 'CMEG' for their losses? (this is not my case of course but can see this happening for the penny pincher foke). I don't think this is the best approach to manage risk but rather a force position liquidation trigger if the client's equity falls below $500 (this is what SureTrader uses).

 

I have been using CMEG for just over 1 month now, and have more than doubled my account size coming from SureTrader. CMEG's excellent commission structure aided in relieving stress during trading and helped boost my profits as well. Also CMEG does not restrict margin on volatile stocks which most other brokers do every morning (a definite positive for margin users).

 

So far I have had only a couple issues with their updates changing my buying power ability (not informed prior of course) and a couple server outages over the month (partially DAS's issue), nothing to complain too much about and I definitely will continue to use their services....but this latest update could prove challenging to continue to be profitable using margin. I hope they can further adjust these rules back to 6:1 or even just 4:1 for a single trade that uses over 70% of BP and consider my above suggestions. I just want to be clear I understand their growing pains and am more than willing to work with them to develop an excellent brokerage for Bear Bull users.

Share this post


Link to post
Share on other sites

Regarding CMEG or offshore brokers in general, will they provide the appropriate records and/or tax documents necessary for US residents?

Share this post


Link to post
Share on other sites

Not sure on that Joe, offshore brokers like SureTrader do not provide a 1099 type form to their clients, last I checked. I file my own tax form 8949 manually, takes a bit more work but TurboTax helps a little with that. This also makes me want to not overtrade ;) and to save up and move 25K-30K to a US based broker once I grow up. I calculated if I trade 50 different tickers a month that's 600 a year that I need to report on. That is worse case scenario and should not take more than a couple of hours filing with TurboTax. I was reporting mostly PnL for the entire ticker as it is a short term investment (less than 1 year holding) the tax rate should be the same. CMEG does provide a report of 'totals per ticker' but you will have to view other reports to get an entry and exit date of those positions. But don't quote me, still very new to this and not sure if I am doing everything correctly.

Share this post


Link to post
Share on other sites

I emailed them about their promotional commission of 2.95, wondering how long this offer is valid for once you open an account. If this is for a limited duration, 8.95 is even worse than Suretrader.

 

I'm disappointed at their margin requirement though, and with minimal to no margin on cheaper stocks, I don't know how good this offer is vs Suretrader at regular prices. I'm no fan of suretrader, I would ditch them in a heartbeat, but looks like for those of us with less than 25k capital, there doesn't seem a good option. Let me know what you guys think.

Share this post


Link to post
Share on other sites

Hi Kmel,

 

I think the 'Active' column on the far right of the Pricing page applies to us, that 8.95 rate I think for a non active trading account that doesn't use DAS and probably just their web client. I'm guessing similar to TD Ameritrade. I know..not so straight forward.

Share this post


Link to post
Share on other sites

Correct.

 

I had a chat with CMEG, and it seems that are updating their margin requirements based on the feedback you guys provided. Thanks. They said they will let us know soon.

 

Cheers,

Share this post


Link to post
Share on other sites

So since CMEG does not provide 6:1 for shorts but Sure Trader does provide 6:1 for shorts, and sure trader is offering the $2.95 per trade deal for bear bull members just like CMEG, it seems like Sure Trader is the better deal?

Share this post


Link to post
Share on other sites

Tech_Tarzan, I believe you mean SpeedTrader, not SureTrader. SpeedTrader has 4:1 leverage and requires $30k minimum deposit. It is a U.S. based broker making it preferred over CMEG if you have the funds.

Share this post


Link to post
Share on other sites

I just emailed CMEG the following note:

 

Hi, I just tried to short 1000 shares of TVIX at 11.83, which represents 45% my total buying power. The error message is "No enough buying power". What is going on?

 

Thanks,

James

 

 

 

Share this post


Link to post
Share on other sites

Hi Wowsers,

 

I think CMEG requires a $5 per share maintenance for stocks under $16.60, see above rules.

 

Thanks!

Share this post


Link to post
Share on other sites

Hey y'all. Have been emailing CMEG directly. Received this earlier today:

 

Revised Maintenance Requirements, effective April 6th, 2018.

 

Maintenance Requirements

 

A 16% maintenance requirement for stocks that are priced at more than $4 per share - When trading stocks over $4, equity needs to be at least 16% of the trade value. e.g. If you buy 100 shares of XYZ @ $10 you will need at least $160 to enter this position

 

A maintenance requirement of $2 per share applies to marginable stock valued from $2 to $4 per share. - For any stock priced between $2 - $4, $2 of equity is needed per share. e.g. If you buy 100 shares of XYZ @ $3 you will need at least $200 or that amount will be needed to enter this position

 

A maintenance requirement of 100% is needed for all long stocks trading at $2 and below. - No margin is offered on stocks priced below $2. These will have to be bought on cash.

 

A maintenance requirement of 100% is needed for all short stocks trading from $2.50 to $5 per share. - No margin is offered to short stocks priced below $5. These will have to be bought on cash.

 

Clients have maximum use of their buying power with the exception of stocks that fall in the categories indicated in the Margin Requirements. The leverage given is based on our Leverage Schedule, see below.

 

Account Value Leverage

 

$0-$499 1:1

$500-$2499 4:1

>$2500 6:1

 

Share this post


Link to post
Share on other sites

Hi All, again I received an update from CMEG on their current margin rules requirements, I will follow-up with CMEG if I have any further questions and post all replies here.

 

At CMEG, they have chosen a rules-based method that is built into all systems that they use. There are major differences between CMEG and other brokers such as Sure Trader and IB that account for the differences in how they choose to monitor and manage risk. They Risk Management Policies and Margin Policy are intended to be reasonable and realistic methods of control. Clients will have their full buying power for most stocks with the exception of those that fall under the rules.

 

CMEG has taken a more conservative approach with they rules and plan to reduce the rules on the system. They included this below with explanations as requested. This revised policy will take effect from April 6th.

 

Maintenance Requirements

A 16% maintenance requirement for stocks that are priced at more than $4 per share - When trading stocks over $4, equity needs to be at least 16% of the trade value. e.g. If you buy 100 shares of XYZ @ $10 you will need at least $160 to enter this position

 

A maintenance requirement of $2 per share applies to marginable stock valued from $2 to $4 per share. - For any stock priced between $2 - $4, $2 of equity is needed per share. e.g. If you buy 100 shares of XYZ @ $3 you will need at least $200 or that amount will be needed to enter this position

 

A maintenance requirement of 100% is needed for all long stocks trading at $2 and below. - No margin is offered on stocks priced below $2. These will have to be bought on cash.

 

A maintenance requirement of 100% is needed for all short stocks trading from $2.50 to $5 per share. - No margin is offered to short stocks priced below $5. These will have to be bought on cash.

Share this post


Link to post
Share on other sites

They have also stated to me that Andrew's promotion of 2.99 for equities is for the life of the account, so other than the fact of $2500 minimum required for 1:6 margin, CMEG > Suretrader for those of us under 25k account, very nice.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×

Important Information

By using this site, you agree to our Terms of Use, Privacy Policy and use of We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue..