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Broker Aims to Cut Futures Fees by Unbundling

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GREENWICH, Conn. (–Interactive Brokers LLC began offering its futures trading in an unbundled commission format, allowing investors to take advantage of cost differences among different exchanges and for different sized trades.

While the Interactive Broker’s bundled commission is still offered–for most U.S. contracts the rate is US$2.40 a contract–the company said that most customers would do better by choosing the unbundled option.

And as fees theoretically drop among the world’s futures exchanges, which are fighting for market share, those savings will be passed on to the customer.

In the United States, the unbundled execution cost for futures trading will be US$0.90 a contract for trades of fewer than 300 contracts. The clearing fee for that trade would be US$0.40 a contract, while the carrying fee, which is for contract trades held open overnight, would be US$0.10. Interactive Brokers would add to that the appropriate exchange fees and regulatory fees.

The unbundled execution fee drops as trade size increases beyond specific points but on a marginal basis, meaning the lower rates only apply to those contracts above the break point of the trade. The lowest rate in the United States takes effect marginally for trades greater than 20,000 contracts with a rate of US$0.25 a contract.

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