When I worked for a clearing firm, coding the hieroglyphic fee schedule into our clearing system was a nightmare! Coding mistakes happened and occasionally we had to rebate clients on mischarges. I was fairly good at it and had to explain the fee detail to my clients, but many man-hours were spent doing so, and many times we just had to get the CME fee people on the phone for a conference call to guide us. We also had to explain to our clients what seats they needed to trade specific products. There was a whole network of exchange employees, clearing firm employees, and independent contractors who serviced this esoteric corner of the trading industry.
I also used to lease seats, worked through the demutualization of the exchanges, and served on an exchange membership committee for a long time. I knew many ex-traders whose monthly seat rental was like their pension. Talking to these old seat lessors was great as were a source of many great stories from the old days. I knew a guy who had been a CBOT chalkboy as a teen, working on the catwalks above the pits on the old CBOT floor, writing down prices on the chalkboards.
Did not know that happened inside of clearing firms but it is not a surprise that it would. Imagine how many man hours across the world have been spent with miscodes on fees. Imagine how many tough conversations have been had.
Unfortunately the legacy clearing systems were not designed for the number of fee levels the exchanges charged. We only had so many data fields, which sometimes led to two exchange fees combined into one field. The clients always thought we were scamming them until they understood the gravity of the problems.
Then, if the exchange published a new fee schedule, it was all hands on deck in our firm to code everything correctly on the day the new fees started. The nightmare was real.
There were even exchange fees we just could never code due to system limitations, so every month we would rebate our clients the extra fees we charged per trade. Now you know the volume that options and futures client traded, so this was another nightmare, and led to much back and forth with the trading firms. Some of our spreadsheets were so large from a month’s worth of trading that we would start the recalculations at the end of the day just before we left, then hope they would be finished when we came in the next morning.
Another interesting incentive that has been offered for years by multiple crypto firms is a separate commission discount for being a market maker rather than a market taker. For example, you pay the standard commission fee on a transaction if the market is one bid at three and you sell it at one or pay three to buy that product, but if you enter a two bid or a two offer, thenyou are now making a new market and your commission is half or a third of what the market taker or standard commission fee would be. This is often effective to increase liquidity on newer products and something similar, but not identical, was done decades ago on both exchange floors in Chicago, when they introduced a new product, where there would be no commission or reduced commissions on trades to add to the participation.
Can be done at regulated traditional exchanges. They have to put in a program. I was a bit PO'ed when CME management did it for electronic trading in hogs and cattle. They incentivized moving from pit to screen.
When I worked for a clearing firm, coding the hieroglyphic fee schedule into our clearing system was a nightmare! Coding mistakes happened and occasionally we had to rebate clients on mischarges. I was fairly good at it and had to explain the fee detail to my clients, but many man-hours were spent doing so, and many times we just had to get the CME fee people on the phone for a conference call to guide us. We also had to explain to our clients what seats they needed to trade specific products. There was a whole network of exchange employees, clearing firm employees, and independent contractors who serviced this esoteric corner of the trading industry.
I also used to lease seats, worked through the demutualization of the exchanges, and served on an exchange membership committee for a long time. I knew many ex-traders whose monthly seat rental was like their pension. Talking to these old seat lessors was great as were a source of many great stories from the old days. I knew a guy who had been a CBOT chalkboy as a teen, working on the catwalks above the pits on the old CBOT floor, writing down prices on the chalkboards.
Did not know that happened inside of clearing firms but it is not a surprise that it would. Imagine how many man hours across the world have been spent with miscodes on fees. Imagine how many tough conversations have been had.
It goes away with my idea.
Look at the upcoming Ag schedule! This is giving me PTSD just looking at it. https://www.cmegroup.com/company/files/cbot-fee-schedule-2025-03-31.pdf
What an unmitigated shitshow. It's actually embarrassing that the CME has not streamlined this.
Unfortunately the legacy clearing systems were not designed for the number of fee levels the exchanges charged. We only had so many data fields, which sometimes led to two exchange fees combined into one field. The clients always thought we were scamming them until they understood the gravity of the problems.
Then, if the exchange published a new fee schedule, it was all hands on deck in our firm to code everything correctly on the day the new fees started. The nightmare was real.
There were even exchange fees we just could never code due to system limitations, so every month we would rebate our clients the extra fees we charged per trade. Now you know the volume that options and futures client traded, so this was another nightmare, and led to much back and forth with the trading firms. Some of our spreadsheets were so large from a month’s worth of trading that we would start the recalculations at the end of the day just before we left, then hope they would be finished when we came in the next morning.
Another interesting incentive that has been offered for years by multiple crypto firms is a separate commission discount for being a market maker rather than a market taker. For example, you pay the standard commission fee on a transaction if the market is one bid at three and you sell it at one or pay three to buy that product, but if you enter a two bid or a two offer, thenyou are now making a new market and your commission is half or a third of what the market taker or standard commission fee would be. This is often effective to increase liquidity on newer products and something similar, but not identical, was done decades ago on both exchange floors in Chicago, when they introduced a new product, where there would be no commission or reduced commissions on trades to add to the participation.
Can be done at regulated traditional exchanges. They have to put in a program. I was a bit PO'ed when CME management did it for electronic trading in hogs and cattle. They incentivized moving from pit to screen.