Some traders want nothing more than an order desk... no comments, no market opinions, and no information. If you are this type of client, then you are an ideal account for a discount firm. On the other hand, you may want help in placing your orders, upscale trade execution, or some help in trying to understanding market conditions. If you are this type of account then a broker assist or full service trading account makes more sense.

Regardless of whether you use discount, full service, or somewhere in-between, you want an efficient firm that will provide good execution.  You will never see this advertised but trade execution is far more important than any commission rate.  Trade execution is an art, a technique and style and is not found at every firm.  Unfortunately there are far too many brokers who have nothing to offer other than cheap commissions.  No matter what you might think, poor order execution can be a much greater problem on a trading campaign than higher commissions. Consider that a one-tick differential in the S&P 500 Index represents $25.00. If a broker charges $50 in commission but consistently reports two to five tick better fills, it is obvious that you are getting a good deal even with the higher commission rate. A very low commission rate with bad fills is no bargain, and this is the main problem with some of the well know discount commission houses, their market execution and service “are fully discounted,” and any perceived savings in commissions is more than lost in horrible trade execution.

"Direct to the floor” refers to placing orders directly with floor brokers. This is usually considered the most time-efficient and professional method of placing trades, and the “direct to floor” service should far exceed whatever the heavily advertised benefits of online trading. However, the trading floors are usually very busy places, and their mode of operation is “trade or travel.” The floor trading desk will not have time for socializing, and they are not a quote service.  The quickest way to end your direct floor privileges is to either nag the trading desk for endless useless quotes or constantly trying to be cute and tricky by “cancel replacing orders.”  For those who like to call for “market indications,” the floor custom is to be a five up (5-lot) trader, and then “hit” the bid or “take” the offer, and at the worst, place a buy or sell order at the middle value of the “current market indications.” For those who lack the conviction of a trading plan and have to constantly “cancel replace orders” when they get close to the market, let me suggest the benefits of moving to “online trading.”  By going to the online platform, you are not wasting anyone’s valuable time, and you take full responsibility for any trading errors you might create.  No matter if they are located on or off the exchange floors, trading staffs are much too busy to play nurse maid.

All brokerage firms have an "upstairs order desk." This is a staff of experienced brokers or clerks who take your orders and either call them to their floor brokers, place them on quick efficient electronic order routing systems, or give them to special floor brokers whose clerks will work closely with the upstairs trading desk to get the best and most efficient fills. Again, upstairs trading desks are also very busy and the staffs usually do not have time to discuss your trading ideas, or give you ideas about how to place your orders.  You are not paying for their time and expertise so do not expect it for free.

Since they are watching several different markets at one time, upstairs trading desks could be much busier than trading floor operations.  Whether you are going to the trading floor or using a trading desk, you should be well organized. Make sure you do not double-enter a trade or forget to cancel a stop when closing out a position.  Neither floor operations nor upstairs trading desk are “not held” on what you think are your normal contingency situations involving multiple order tickets in the same market.  Unless you provide specific instructions for a “not held” basis to cancel orders, a good trading desk will not do anything with resting orders you leave in the market until you specifically instruct them to cancel them out.  Read your account forms carefully, the obligation to call and check your orders rests on the shoulder of the client and not with the broker.  If you are not paying higher commission rates for enhanced services, do not expect them for free.

Normally, the more sophisticated traders place a significant portion of their trades with a personal broker.  In this relationship, the broker knows you and your personal trading habits. A personal broker follows your account, is familiar with your positions, and monitors your working orders.  Even with a personal broker, you must remain well organized and communicate your trading instructions clearly to avoid costly trading errors.  However, a good full service broker can frequently catch possible problems before they occur. Your broker clearly has an incentive to help you make successful trades because he will continue earning additional commissions from your successful trading account.  Also, in this “full-service” to “broker assist” relationship, after a bond of trust has been established, it is not unusual for the client to give the broker some “time and price” discretion on when he places and how he fills your orders.  Normally, this relationship occurs with large well capitalized traders who know the value of service and are willing to pay for it.  Smarter brokers try to build their business on these types of relationships and avoid the agony of “one lot online e-mini hell” clients.

If you use a personal broker, you are likely to pay a higher commission. Of course, if you have a large account with high volume, your commission rates will certainly be open to negotiation.  It is not usually the case for large sophisticated traders to have more than one broker, and even more than one broker at the same firm. The most important criteria when choosing a broker is honesty. It is often a good practice to go to the National Futures Association website (http://www.nfa.futures.org) for a quick background check of not only the broker but also the firm he is associated with. Find out if there have been any complaints or disciplinary proceedings filed. Determine the nature of any such problems. Be careful in your evaluation of any broker or his firm. Keep in mind that a sanction for a bookkeeping error is far less significant than a fine for trading irregularities. If a broker or brokerage firm you are considering has had compliance or regulatory problems, ask for an explanation.

Most brokers are honest and hard working. Therefore, the second most important criteria is experience. There is no substitute for experience... the longer the better! Experienced brokers are familiar with all types of orders, strategies, and market conditions. They are less likely to panic and keep their heads in fast market conditions, and should have good risk control and money management routines.

Some of the best professionals are those who have both "downstairs" and "upstairs" experience. If you can find a broker who has worked on the floor of the exchange as well as in an "upstairs" trading environment, it may be extremely helpful. Having floor trading experience gives insight into the way trades are executed and how the exchange clearing process really works. Obviously, there are many highly qualified brokers who have never worked on an exchange floor. Yet, trading floor experience is simply one more aspect you might look for when selecting either the broker or the firm where you will trade.  Stay away from brokers who seem to excel at predicting the future and know what the “next tick” in the market is going to be, and look for brokers who stress risk control, money management and service.  Nobody can predict the future. Do not make the mistake of making “fortune telling” a criteria in selecting your broker.

Your decision concerning your commission rate is extremely important because your profit performance can be affected. Commission rates can be as low as $15 per round-turn at a deep discount broker if you maintain a high trading activity and large account balances. More common discount rates range from $25 to $40. Full service commissions usually begin around $40 and can be as high as $75. A "round-turn" commission refers to a completed transaction, in and out of the market.  Most brokers will charge you on a "half-turn" for futures contracts. For options, some brokers may charge the full commission when you enter your trade and nothing when you exit.  The best rate on options is “half-turn” with no expiration fees.

While logic dictates that "you get what you pay for," this is not always the case when seeking brokerage services. Some discount firms provide excellent support. Some "full service" companies can be disappointments. The criteria for selecting whether to use discount or full service depends upon the support you need and the service you desire. Commodity futures markets are exciting and potentially rewarding. A good relationship with your broker will enhance this experience.