Let's speak out on IB & Options House shortcomings

C2
1

InteractiveBrokers cons. I am doubtful about maintaining a master account for C2 autotrading at Interactive Brokers. Because…

  1. Several times, my GTC trail and stop orders have been deleted overnight, wrongly and for no reason.
  2. The other day, a glitch made me unable to make any trades at IB. In the morning, I made trades. Then in the afternoon, suddenly a popup appeared, “only the advisor can make trades in this account.” This was at one time an advisor-listed account–but at no time was I not supposed to be able to trade–including that same morning. IB support said that several accounts were having that problem and it was fixed by the end of the day. But this would have been a disaster if it were a master account.
  3. Meanwhile, anything done at the C2 “new trade” control panel is totally reliable. GTC stops do not disappear. Etc. C2 does not enable “trailing stops.” But it is better to update the stops manually than to risk that the stop will disappear!

InteractiveBrokers pros: the best place to hold a C2 client autotrading account–maybe the only place–because trading fees and margin fees are both less than half the cost of anywhere else. Also, the the glitches and complications of IB accounts do not pertain to a C2 client autotraded account. Also, IB security is top notch, with multiple log-in protocols, and the ability to activate trade-only aliases for trading away from home.

Options House pros. OH is the only other place to even consider for C2 autotrading–because IB and OH are the only two places that have reasonable margin fees. OH is not as low-cost as IB but is substantially lower cost than anywhere else.

Options House cons.

  1. Tacky name.
  2. Tacky interface. Still uses the “trademonster.com” URL.
  3. Tacky cash transfer. Transfer orders say, “Something-something clearing house.” This raised eyebrows at my bank. It looks like the money came from some casino or money laundering operation.
  4. Lax security. A lost-password system that is too easy. No possiblity to open trad-only alias accounts. No high-security log-in options.

In summary, after the merger with Trade Monster, Options House is in a very strong position. Howvever, I simply cannot suggest to friends to hold their life savings in such a place. Nor for wealthy people to entrust such a place with large amounts of capital. OH can fix this by focusing on respectability and security to the same degree as IB has done. The first step is to get a respectable name (that pertains to all types of investing and that does not sound like a comic book) and to get that name to show on any cash transfers.

Technically, some of this might not matter. However, holding people’s money is a very serious business. It is important to prove that you are very serious about this in every possible way–whether this is technically important or merely for appearances. A broker who is clueless about “how things look” is likely to be clueless or lax about some other things which nobody sees.

I say this as someone who would very much like to see a strong low-cost alternative to Interactive Brokers. I am thankful that we have Interactive Brokers but it would be nice to have at least one other place in which to diversify custodial risk. So far, Options House is the only contender but needs to make more effort to become a truly serious place to invest.

I am writing this in the hope that Interactive Brokers and Options House will improve. I especially hope that the management of Collective2 will mention these suggestions repeatedly to IB and OH because their opinions certainly can receive much more attention than those of myself or any individual clients.

2

I’ve had a IB account for years. Whilst it is far from perfect, it is one of the better brokers for like you say the commissions and margins

3

I agree, B48ES. IB is definately the best.

I have decided to use the new C2 system that enables a C2 autotrading system to copy-cat the trades done in an IB account. Mainly because the C2 website system does not enable Trailing Stops.

However, does this enable me to qualify for TOS status (Trades Own System)? OR do I STILL have to pay for the C2 software AND maintain a separate account using that software in order to verify that I am “trading own system”? Even though obviously, I must be “trading own system” if the system is mimicking my real-money IB account.

I.e. in order to qualify for TOS status, then perhaps I am hit with multiple costly redundancies.

  1. Firstly I must pay about $900 annually for C2 software which I do not need–because, for me, that software is only mimicking the trades that I myself am initiating? (Just to qualify for TOS.)
  2. Secondly, I must maintain TWO IB accounts for the same system? (Just to qualify for TOS.)
  3. Thirdly, if I must have 2 accounts then I must have $90,000 in the system. Because my system does some day-trading. Thus requires a minimum of $45,000 per account to stay above the $35,000 minimum for day trading.

I.e.–if I have my C2 system mirror-trading my real-money IB account–then IRONICALLY I might not qualify for TOS status–because it is doubly difficult to do so while also maintaining an IB master account for the same system. If so, I will have to cease my TOS status–even though I am obviously “trading own system.”

(If anyone can confirm or refute this, please reply here? Thank you.)

4

You can use the “Trade Leader” program to automatically copy trades you make in your Interactive Brokers account into the C2 strategy that you run.

You will automatically qualify for Trades-Own-System (TOS) Certification. No extra fees, no extra hassle.

In other words, as a Trade Leader, you do not need to sign up for AutoTrading other people’s strategies.

(However, you can, if you want. In fact that’s one of the cool things about the Trade Leader technology: you can use the same single broker account to be both a leader and a follower, and C2 will recognize which trades are which, so that the traders you follow do not affect the trades you make as a leader.)

To learn more about the Trade Leader program, follow this link:

https://www.collective2.com/leader/intro

P.S. The “Trade Leader” program is compatible with a few brokers, not just Interactive Brokers. You can also use your broker accounts at: AMP Clearing, Optimus, Daniels Trading, Gain Capital (OEC), MB Trading, and OptionsHouse.

5

I dont see FXCM in the leader program anymore ?

6

Thank you for the good news, Matthew! Thanks to your information and referecne link, I will start setting up an “Investment Leader” situation as soon as possible!

Also, just in case anyone else might be interested:

  1. Based on my experience, an IB “investment leader” account should be monitored daily for anything strange happening to any standing orders.

  2. Any time I found a steadily-performing C2 system it usually costs about $100-$200 monthly = $1,200 - $2,400 yearly to subscribe. Plus $900 for the C2 software. Not worth it with less than $50,000 per system, in my opinion. And of course you must be willing to risk the $50,000. I would like to follow several C2 systems, but cannot afford to do anything except my own system.

  3. If a system uses leverage (or uses FX or derivatives which are charged for margin even if not leveraged) then, in my opinion, avoid all brokers except Interactive Brokers and Options House. They are the only ones which have reasonable margin rates. Do some googles on this topic and you will see.

  4. IB margin rates are so low that I can hold on-margin TIPS ETFs to increase security–similarly to being diversified among several different brokers.

I.e., my system does not use leverage–but I will be holding 30% of account value in short-term TIPS ETFs and 20% in gold bullion ETFs–with only 10% per ETF. Of this, 30% is on-margin. During sudden downturns, my Stops will close stock market positions and increase the gold to 30%.

(Gold usually goes down as the S&P 500 goes up and vice-versa. Short-term TIPS ETFs are like a high-security cash position, seldom gaining or losing more than 4% annually. TIPS ETFs generally hold about 10% cash but otherwise their TIPS are directly backed by “the full faith and credit of the US government”–and also are partially, though not entirely, “inflation protected” in the event of a plunge in value of the US dollar. I.e. by holding gold and TIPS ETFs, the value of your cash can survive even if your broker and the SIPC both declare bankruptcy.)

If the US federal government had not bailed out Goldman Sachs in 2008, nobody knows what might have happened to FDIC insurance, SIPC insurance, Put-buys, FX positions, SWAPS or inverse ETFs. No cash position in any broker would have been safe. I.e. even if you closed all investment positions in 2008, this could have left you with a huge cash position which was an “unsecured loan” to a collapsing financial system. Also, the flash-crash phenomenon–and the new influence of China which is relatively unstable and under-regulated–show that the next 2008-level recession could enfold overnight or within minutes.Therefore, I always hold 50% to 60% of account value in gold and TIPS.

Investors holding more than $500,000 per account should diversify among several brokers. Such investors can implement similar security measures in any broker charging $10/trade or less–without using margin–and instead using conditional Stops to convert positions to gold and TIPS during downturns. Or, simply do not invest half your money–and instead place half your money at a separate broker in a “ladder” of individually-bought TIPS.

However, for smaller accounts, only Interactive Brokers is very feasible for implementing 2008-level security measures.