What is a futures broker?
A futures broker is a financial institution that provides direct market access to futures exchanges so that its clients can trade futures contracts. When trading futures, traders buy and sell futures contracts that give them the obligation to buy or sell a set amount of a specific asset at a specific date in the future. For a fuller explanation, please refer to our guide on futures trading.
Futures brokers in the UK
All futures brokers in the UK must be regulated by the FCA. You can check the status of what a futures broker is regulated to do on the FCA register. Most futures brokers will have an office or exposure to the London futures markets, as the UK offers one of the most robust financial infrastructures for trading futures.
The majority of UK futures brokers require clients to be classified as professional and have a clear understanding of the risks and mechanics of futures trading before they can have an account. The UK regulator, the FCA, requires all clients to either be classified as retail, professional, or ECP (Exchange Counter Parties). Retail clients tend to trade more accessible products such as financial spread betting or CFDs through a CFD broker, which often require smaller trade sizes. Futures brokers in the UK have their margin and trade size levels set by the underlying futures contracts, and the margin is set by the exchanges where the futures are traded.
The best futures brokers in the UK
You can compare the best futures brokers in the UK in our comparison table of futures brokers. In the comparison table, we highlight the main factors in determining what constitutes the best futures brokers. Namely:
- Cost of trading futures
- Futures exchange access
- Added value, such as research
- What accounts types are available
The best US futures brokers
US futures traders are not allowed to trade futures through a UK-based futures broker. US regulations require that US residents trade futures through US futures brokers. However, most UK-based futures brokers will have an office in the US and our comparison tables will redirect users to US futures broker entities if they are based in the US. UK futures traders are allowed to open futures trading accounts with US futures brokers. As with UK futures brokers, the same criteria for determining the best US futures brokers are the same. However, in the US, as there are no other derivatives products like spread betting or CFD trading, private (retail) traders are more likely to trade futures and options as a way to get leveraged exposure to the financial markets.
The difference between futures and options brokers
Futures brokers are often referred to as futures and options brokers, as futures brokers also provide access to the options markets. Options contracts are traded on the same exchanges as futures options. For example, a futures broker will provide access to FTSE futures as well as FTSE options. It is possible to trade futures and options strategies that offset the exposure of futures and options. For example, buying call options and selling FTSE futures to speculate on, or protect against volatility. For more information on options brokers, please refer to our guide on options trading.
Online futures brokers reviews
Read reviews of futures brokers in the UK and see what clients think of their services. The below futures brokers have asked their clients to review their services on Good Money Guide, which you can read on the links below:
Futures brokers CEO interviews
As part of our review process and featuring futures brokers, we have interviewed some of the CEOs of the largest futures brokers in the world. You can read these interviews here:
Fees charged by futures brokers
The main fees associated with futures trading are:
- Commission- this is charged on a per-lot basis for every lot traded.
- Exchange fees- this is a fee charged by the exchange that the broker either includes in the commission or passes on to the client.
- Foreign exchange- futures are settled in various different currencies, so if you are trading USD denominated futures and your account is in GBP, there will be a cost to convert USD P&L into GBP.
- Account interest- if you are running an account overdraft in either your base currency or other currencies, your account will be charged interest every day that it is overdrawn.
Discount futures brokers
A discount futures broker offers clients significantly reduced fees for online trading and algorithmic trading. For futures traders that trade in significant volume, futures brokers will reduce commission and the exchanges will also reduce exchange fees. Futures brokers are able to negotiate these discounts on behalf of their clients, based on the volume of trades that are placed.
Online futures brokers in the UK
All futures brokers offer online futures trading through either their own propriety trading platform or third-party platforms. Most futures trading is done online through futures brokers, although there is still demand for telephone-based futures broking, known as voice brokerage. Our comparison table of online futures brokers in the UK highlights which brokers offer voice and online trading, as well as prime and API access.
The best futures broker for scalping futures
When looking for a futures broker for scalping, the main thing to consider is costs and market access. Scalping is a type of trading where futures traders buy and sell quickly with the intention of taking advantage of small moves in bid-offer prices.
The best futures brokers for scalping will offer direct market access to the futures exchanges, so traders can work orders inside the market prices. Traders that are planning on scalping should inform their brokers of this so that they can negotiate lower trading costs, as the lower the cost of trading futures, the higher the returns on a scalping trading strategy will be. You can read more on why some brokers don't allow scalping here.
E-micro futures brokers
E-micro futures are mini versions of full-size futures contracts. They were introduced to allow futures traders to have more control over their exposure by trading in small contract sizes. They are particularly helpful for smaller futures traders or beginners, as e-mini futures contracts require a lower margin and have less exposure to the markets. Due to their popularity over full size futures contracts, they are also more liquid contracts and are therefore more accessible to trade.
For example, the full size S&P 500 futures contract is worth $250 times the S&P 500 index, whereas the e-mini S&P 500 futures contract is worth $50 times the S&P 500 index.
Best futures brokers for beginners
Futures trading is a high-risk form of speculation and not suitable for complete beginners. If you are a beginner and looking for a futures broker, these are the main things you consider:
- Do you fully understand the risks?
- Do you have enough risk capital to diversify your exposure?
- If you do not have the relevant experience, you will be classified as a retail client and not allowed to trade futures.
- If you can demonstrate the relevant experience, you will be classified as a professional trader and your futures broker will not be obliged to explain how the markets work, and you will lose some of the protection the FCA offers retail traders.
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