Futures Brokers - are accounts all in USD?

I'm thinking of putting myself through the Free Prop Trader Training Course and would like to open an account with a Direct Market Access provider. I've applied for one with Velocity Futures since they seem to be recommended in the Free Prop Trader Training Course. I have plenty of experience in spreadbetting but not with DMA.

In contrast to spread betting companies it seems that the DMA providers are very US centred. Does this mean that (a) when I deposit funds they have to be converted to USD (incurring conversion charges and currency exposure) and (b) prices for UK shares are converted to USD? Both would seem rather unsatisfactory but I couldn't see any option to open a GBP account with Velocity.

Also I'm not quite clear on the difference between a DMA provider and a futures broker. They seem to be two separate options here, but what's the difference?

Thanks for any help.

Hi Arbu,

Arbu said:

. . .(a) when I deposit funds they have to be converted to USD (incurring conversion charges and currency exposure).

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Normally, yes. To deposit funds with most U.S. brokers will require you to have the base currency in U.S. dollars. Interactive Brokers are one exception (there may be others). They allow you to specify the base currency. However, if you specify GBP sterling and then trade U.S. stocks, you'll still have to convert the margin requirements for each trade from GBP into USD. So, having the base currency in GBP won't really help you.

Arbu said:

. . . . and (b) prices for UK shares are converted to USD? Both would seem rather unsatisfactory but I couldn't see any option to open a GBP account with Velocity..

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If you know you want to trade U.K. instruments, why not use a U.K. broker?

Arbu said:

. Also I'm not quite clear on the difference between a DMA provider and a futures broker. They seem to be two separate options here, but what's the difference?

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A DMA broker only makes their profit from commissions on your trades. There is someone else other than your broker on the other side of your trade. Most non DMA brokers (e.g. spread betting firms) take the other side of your trade. Have a read of these FAQs, all should become clear:

Can You Recommend a Data Feed, Charting Software & Broker?
This explains the DMA Vs non-DMA issue in greater depth

What are the pros & cons of Spreadbetting versus CFDs
CFDs might be a half way house solution for you if you want to move away from spread betting but, for whatever reason, don't want to go down the full DMA route.
Tim.

timsk said:

If you know you want to trade U.K. instruments, why not use a U.K. broker?

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Thanks v. much Tim. I do want a UK broker. But of the three DMA providers listed on proptraders.net, Open eCry and Velocity Futures are both US brokers. That seems strange given that the proptraders website is essentially a UK one. I thought that Interactive Brokers was US too, but looking closer it seems they do have a UK arm, so there's a possibility there. However I've had a quick look at the IB Trader Workstation just now and am not that comfortable with it - I can't even get a proper graph up with it. Either I need to play around with it more or find another UK broker.

I suppose the question really is why exactly I want a DMA account. Basically for the reasons stated on proptraders.net "Bear in mind that professional prop firms look down on spreadbetting because of the wide market spreads and fact that the counterparty to your trade is also in control of the price, so they would never offer you this option." I agree with that and also I think that having the information presented in the "ladder" would be helpful and I would be interested in using APIs for some simple coding. Those don't seem to be available with the spread betting companies.

Thanks for your suggestion of CFDs. I have a CFD account but have hardly used it because the commissions have been so high. I don't really think it would have the advantages over spreadbetting that I'm looking for.

Hi Arbu,
IB are essentially a U.S. brokerage house although, as you say, they have offices in London. However, if you opened an account with them I suspect you'll find that you deal with the customer services arm which is based in Switzerland. Not that that's a particular issue in this day and age. The big plus about IB is that they are one of only a handful of brokers who offer a 'Universal' account - from which you can trade just about anything. I may be wrong, but I suspect that the 'Futures' part of Velocity indicates that you can only trade futures! I'm with Infinity (who I recommend heartily, btw) and I can only trade futures with them (they're US based).

Re. U.K. based firms, check out the Reviews section. Here are a few to consider:
MF Global
Sucden Financial
GNI Touch
ODL Securities
I think all of the above are UK based, but I'm not 100% certain. Although ODL are best known for their spread betting operation, I believe they offer a DMA futures platform as well. If you come across other UK firms NOT listed in the Reviews section, please let me know and I'll add them.
Happy hunting.
Tim.

Thanks again.

This is hard work. For one thing I'm astonished at how rudimentary some of the software is, compared to spread betting services. MF Global sent me a link for a demo programme and I get a big error when I try to access it. I've managed to get myBroker from ODL Securities working but it's not exactly easy on the eye. They've also sent me an email with a broken link to access the user guide for the application so I don't really understand how it works. GNI Touch's website links through to MF Global btw.

I'm starting to see the advantage of a "universal broker". Otherwise it seems I may need separate platforms for futures and for equities (single equity futures not being something that exists?)

I think I should go with LMAX, betfair's new offering. They're offering commission free trading on CFDs for 30 days. After that I'll understand much better what's on offer and will be able to decide whether to continue with them or open an account elsewhere. Plus I already use betfair for sports betting so I'll get to know quite a bit about them, and maybe can start trading betfair shares!

Fair Value Futures (see other thread) would seem to be what you/we need, but the feedback isn't promising.

So much for the Free Prop Trader Training Course - the link seems to be broken now.

Six weeks through the course now and I've been doing a lot of reading but I've yet to choose a broker. I did apply for accounts at LMAX and Sucden but LMAX turned me down on financial grounds and Sucden never replied. So looks like I'm stuck with spreadbetting. Actually I like the tax advantages of that so much that I don't really mind. I suppose I could try Worldspreads with their 0% spreads offer, although the issues raised in this thread http://www.trade2win.com/boards/spread-betting/26914-worldspreads-11.html are a big worry. I guess as and when I start having problems I can move my money out.

Otherwise prospreads would be good, although they tell me they're looking for clients who are professional traders and make regular trades, so I think I might have problems if I apply there.

On the plus side, I was convinced that the inflation figure today would disappoint, and had placed a notional trade, so at least I'm learning something