Futures can be useful in trading diversification. Self-directed investors seeking a futures broker should not only familiarize themselves with the risks associated with trading futures, but make sure that the firms they vet have the right answers. To get those answers, here are some key questions investors should ask:
1. What is the brokerage firm’s reputation and experience?
It is important to ask questions that will help you to gauge how sharp a brokerage’s overall senses are with regards to market performance and the needs of traders. Ask the firm: Has your company’s team been successful before? How long have you been in the futures industry? Experience is crucial. For example, Tradovate’s team has a history of success in developing other futures ventures - this means our team is iterating a new futures trading experience based on a strong understanding of traders’ needs.
A sub-question: Is the brokerage itself driven by innovation or merely meeting quarterly financial goals? Some companies can be hyper-focused on meeting the next quarters’ earnings rather than building for the long-term. An independent brokerage, like Tradovate, is free to focus 100% on the customer without outside pressures and without distractions.
2. What technology sets the brokerage apart?
Technology evolves very quickly and it’s important that the trading platform you use is both responsive and cutting-edge. Ask the firm: Does your platform offer a new, agile next-generation experience? For example, can you easily log in to check quotes and place trades on your phone or tablet? Does using the platform feel as easy as hailing an Uber ride or does it feel more like using a dial-up modem? Investors should be able to “take a look under the hood” in simulation to see if the platform has a clear and visible layout of key trading functions, not stuffed to the gills with obscure bells and whistles.
Ensure that your brokerage is “with the times” on both mobile and data. We’re in an era where fintech is the focus. Cloud, connectivity, and user experience details (at every touch point) should be the rule, not the exception. Cloud-based mobile access is part and parcel of Tradovate’s solution. Accessibility via mobile is a must! Does the brokerage offer a mobile app for trading on the go, anytime, from anywhere?
Another important sub-question: Is the platform actually specialized for futures? Or are futures functions crammed into a framework built for stocks? Unlike Tradovate, some firms actually don't offer essential futures trading tools like a depth-of-market (DOM) on their flagship platform, so be sure to ask -- or better yet, demo the product before you decide to buy!
3. Trader advocacy... or commissions?
One of the more compelling questions that should be posed to brokerage firms is ‘Does a genuine conflict of interest exist between broker and trader?’ This is a direct question that deserves a direct answer. As with any relationship built on trust, transparency is key. Is paying a commission every time you place a trade the only way they can be compensated for their service or is there a better, more modern way that things should be done? What about active, high volume traders - what can they do to manage trading costs? How do you know if you’re overpaying?
It may be a tough topic that many brokers may selfishly wish to avoid, but at Tradovate we’ll provide a clear-cut answer to this question when we launch. It’s time that the issue of commissions is addressed in a way that is actually helpful to futures traders, without a conflict of interest.
4. Is the broker a futures specialist or is futures just a smaller portion of their business?
You wouldn’t trust a person who merely dabbles in medicine with your health, so why would you settle for a futures trading experience with a brokerage whose sole business is not futures? Be sure to ask the firm if they hold the customer account directly or if they are just a reseller of someone else's service (aka a “middleman” or “introducing broker”) ? If they are a middleman be aware that this could potentially lead to higher, unnecessary carrying costs, ultimately passed on to you.
Does the brokerage build their own technology to deliver what a customer wants? Or do they have to rely on someone else who may not want to or be incentivized to make changes? Does the brokerage have multiple business lines like broker-assisted or managed trading? If so, buyer beware as they may try to upsell you on expensive services you might not be entirely comfortable doing.
Tradovate lives and breathes futures all day, every day. Our goal is not to merely say we offer futures to get you in the door then sell you hard to trade equities or equity options. How can other brokerages give the futures trader and futures trading experience their full attention when it isn’t the heart of their business?
5. Does the brokerage have multiple customer service avenues that can be leveraged?
A customer-centric experience can mean the difference in time spent trading the markets versus time spent chasing down answers. And time is money. From timely onboarding communications confirming your account is open and ready to trade, to alerts on webinars covering the latest market trends, will customer service be extended through unintrusive, fluid and timely messages on your trading journey?
Does the brokerage offer 24-hour support channels? A dedicated client onboarding team? If “no” is the response to any of these questions, that may be your sign to keep looking. Additionally, do they facilitate exchange memberships? For example, with Tradovate, if a customer owns or leases a membership with an exchange we can help them set up a new membership or transfer an existing membership.
Clear and easy channels are essential when a trader is in need of answers. Customer service can make or break a futures trading experience and we at Tradovate will have all these points covered when we launch.
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