- 2002: Volume 11, No. 3 How Do You Chose an Online Broker?

It's a great time to be a futures trader! Technology's given you unprecedented speed, convenience, and control. Orders can be entered via the Internet and, in many cases, are executed and confirmed in just seconds. Monitoring your account is a snap, since you can log in 24-hours-a-day. More tools and information than ever before are right at your fingertips. And perhaps best of all, online technology has allowed the individual trader to substantially lower transaction costs.

But as online futures brokers continue to multiply, the choices are dizzying. And picking a broker is one of the most important trading decisions you'll ever make. So which one is right for you? Our simple advice is to go with an online futures broker that's strong in a number of important areas and that offers a complete, solid package of benefits. We've compiled a list of important considerations to help you choose the best online futures broker for you.

There's a Lot More to Consider Than Just a Cheap Trade
True, price is important, but it actually should be one of your last considerations. Rock-bottom commissions are always tempting, but it's far more important to try to keep the bigger picture in mind when choosing an online broker. Prospective brokers should be ranked in a number of categories, and you should use an overall score to determine your top choice. In short, you should be looking for a broker that offers a great overall value, not just a bargain basement price.

Pay Attention to Trade Execution
For starters, choose a broker with a quick, easy trading screen that accommodates every conceivable order type. At XPRESSTRADE, for example, we offer a unique contingent order feature, which allows traders to enter a primary and up to two contingent orders simultaneously. Insist on a free real-time snapshot quote on the verification screen, before you transmit your order. Be sure to pick a direct-access futures broker that will send your orders straight-through to the various futures exchanges for execution, not to a human broker for review or approval.

Here's an important point: you want a broker that offers access to both the electronic and the open-outcry markets—any broker that won't allow you to trade open-outcry markets is limiting your trading opportunities. Fills should be returned to you—quickly, directly and electronically—without any human intervention, and your positions, balances, and margin requirement should be updated dynamically.

Factors to Consider When Choosing an Online Broker
1. Price alone is not enough 2. Trade execution 3. Tools and information 4. Real-time vs. delayed market information 5. 24-hour, global market access	6. Responsive Customer Service 7. A Well-designed System 8. Reliability 9. Financial Stability 10. When all else is considered, consider price

The More Tools and Information, the Better
Does the broker offer quotes, charts, news, analysis, and other tools? In this day and age, you should get unlimited access to real-time snapshot quotes, regardless of your account size or trading volume. Real-time, streaming quotes should be available, too (exchange market data fees will apply, however). Make sure you get free access to a powerful, customizable charting resource. For example, XPRESSTRADE has incorporated an Interactive Java Charts application. Real-time, breaking news is a nice feature. And in-depth research from experienced market professionals, updated each day and available to you on an unlimited basis, totally free-of-charge, is critical if you're going to be successful in the futures markets.

Real-time is the Best Time
It doesn't make much sense to trade via the Internet if your broker doesn't emphasize a real-time trading environment. Every online futures broker should offer unlimited, real-time snapshot quotes throughout the private, secure side of its Web site. If you intend to daytrade or pursue a short-term trading strategy, a real-time, streaming quotewatch application (along with advanced price alerting capabilities) is a must. And if a broker intends to make you wait a day to see an account status report which reflects your trades, look elsewhere—your positions, money balances, margin requirements, and trading power should be updated in real-time, so you always know where you stand. In short, pick an online broker that takes full advantage of its electronic medium to create a real-time trading environment. You should have up-to-the-second information when you trade online.

You Should Have 24-hour, Global Market Access
In the futures markets, timing is everything. Having a true, 24-hour futures broker with global reach can be critical when a significant economic report or political event causes the markets to move overnight. Or when you'd like to trade foreign markets around the world. Or when the trading times most convenient to you-say, midnight to six in the morning-don't necessarily fall neatly into regular business hours. You need a broker that offers around-the-clock access to the U.S. regular and overnight futures markets as well as to the leading international futures exchanges-LIFFE, EUREX, MATIF, HKFE, SGX, etc. In short, it shouldn't matter where or when you want to trade.

Demand Responsive Customer Service
The most common complaint about online brokers is that they typically provide slow, unresponsive replies to customer questions. Nip this problem in the bud by checking out a potential broker's attitude about customer service before you need to depend on it. Can you telephone toll-free, and how long do you have to wait on hold before talking to a knowledgeable human being? How long does it take to receive a reply to your e-mail questions? It's important to pick a broker that seems determined to deliver fast, helpful customer service. Try your best to gauge whether representatives are experienced, cheerful professionals who seem eager to assist you. Finally, make sure that the customer service department's staffed 24-hours-a-day during the trading week—your online broker should be there for you whenever you need help, day or night. Don't overlook customer service—you'll be sorry if it's not there for you when you really need it.

A Well-designed System Will Make Your Life Easier
How easy is it to navigate around your broker's site? Does the layout of the site make sense and minimize the number of mouse clicks it takes to get from one place to another? Is the site so graphic-intensive that you waste enormous amounts of time waiting for pages to load? Look for a broker whose Web site is clean, fast, dependable, and simple to use. Yes, it should be good-looking, too. Ask if useful links from one page to another have been created. Inquire about the opportunity to customize the pages you view, as personalization will improve your user experience. This is big: can you click from any quote screen to a pre-completed order entry screen? These are the kinds of little things that can set an excellent online broker apart.

Ignore Reliability at Your Peril
Many online brokers will tell you that their systems are perfectly dependable, but the reality is that systems do crash from time to time. Machines and software which are pushed as hard as they are in the online brokerage industry will occasionally fail. But what has the broker done to minimize such outages? Does the broker maintain multiple Internet connections through several Internet service providers to minimize the likelihood of connectivity lapses? What are the broker's emergency back-up procedures when the inevitable happens? And finally, again, is there 24-hour customer service, so that you can get help if you need it?

Financial Stability Gives You Peace of Mind
You might already know that most stock brokers are required to carry Securities Investor Protection Corporation (SIPC) coverage to insure the value of your securities in the event that your broker goes bankrupt. However, did you know that there's no futures industry equivalent to SIPC? With this in mind, it's easy to see why choosing a well-capitalized and financially conservative broker is critical. You need to have the confidence and peace of mind that comes from knowing your trading capital's held by a futures broker with a solid balance sheet. Trading's difficult enough—you shouldn't have to worry about whether your funds are secure, too.

Now It's Time to Think About Price
OK, after taking everything else into consideration, it's finally time to investigate price. Be sure that you understand a broker's commission and fee structure prior to opening an account. Some of the very cheapest commission rates come with strings attached—these often only apply to the largest accountholders, or they may apply only to "hyperactive" daytraders, or they may apply only to certain electronic markets. Nasty surprises may be lurking on the fee schedule, too, so be sure to investigate non-transactional fees carefully. Most importantly, though, remember the old saying that "you get what you pay for"—it's true when it comes to futures brokers. It takes substantial capital to run an online brokerage company, and many of the firms offering the cheapest commission rates simply can't afford to provide you with all the tools and resources that are essential if you're going to successfully trade the challenging futures markets. This is a bad tradeoff for you—the cheap commissions simply aren't worth it.

Dan O'Neil is a principal of XPRESSTRADE, LLC, an online broker headquartered in the Chicago Mercantile Exchange Center. XPRESSTRADE is a leader in online futures trading, and now also offers direct, electronic access to the world's largest, most liquid market—the forex market. XPRESSTRADE offers a fast, cutting-edge trading platform that's also easy-to-use, secure, reliable, and highly customizable. The company's website may be found at www.xpresstrade.com, and additional information may be obtained by contacting XPRESSTRADE, 24 hours during the trading week, by e-mail, at info@xpresstrade.com, or by telephone, at (312)715-6228 or (800) 947-6228.