Stock and ETF brokerage costs plunge
Moderator: Global Moderator
Stock and ETF brokerage costs plunge
Firms offering no commissions on trading:
Charles Schwab (announced 10/1/19)
TD Ameritrade (announced 10/2/19, effective 10/3/19)
Interactive Brokers (the IBKR-Lite tier)
Who's next?
This is a boon to anyone desiring to do a DIY stock portfolio consisting of dozens or scores of stocks. However, they still make money off of you. They sell your orders to third party trading desks - high-frequency traders - who make profits by front-running your orders. Then they pay the brokers a sales commission.
I'm going to embark on a long-term experiment wherein I will move assets to Interactive Broker's full platform, which does not sell your orders but instead you pay a trading commission. I'll do side-by-side trades in IBKR and Schwab, and report the results back over time. It will take months, I won't be able to fund IBKR until early November.
Charles Schwab (announced 10/1/19)
TD Ameritrade (announced 10/2/19, effective 10/3/19)
Interactive Brokers (the IBKR-Lite tier)
Who's next?
This is a boon to anyone desiring to do a DIY stock portfolio consisting of dozens or scores of stocks. However, they still make money off of you. They sell your orders to third party trading desks - high-frequency traders - who make profits by front-running your orders. Then they pay the brokers a sales commission.
I'm going to embark on a long-term experiment wherein I will move assets to Interactive Broker's full platform, which does not sell your orders but instead you pay a trading commission. I'll do side-by-side trades in IBKR and Schwab, and report the results back over time. It will take months, I won't be able to fund IBKR until early November.
- dualstow
- Executive Member
- Posts: 14308
- Joined: Wed Oct 27, 2010 10:18 am
- Location: synagogue of Satan
- Contact:
Re: Stock and ETF brokerage costs plunge
Pasting from the Left Eating Itself thread:
(dual.) true! Or stock in similar firms. They fell, broadly.
Re: Stock and ETF brokerage costs plunge
Awesome! Look forward to your analysis.ochotona wrote: ↑Wed Oct 02, 2019 5:45 am Firms offering no commissions on trading:
Charles Schwab (announced 10/1/19)
TD Ameritrade (announced 10/2/19, effective 10/3/19)
Interactive Brokers (the IBKR-Lite tier)
Who's next?
This is a boon to anyone desiring to do a DIY stock portfolio consisting of dozens or scores of stocks. However, they still make money off of you. They sell your orders to third party trading desks - high-frequency traders - who make profits by front-running your orders. Then they pay the brokers a sales commission.
I'm going to embark on a long-term experiment wherein I will move assets to Interactive Broker's full platform, which does not sell your orders but instead you pay a trading commission. I'll do side-by-side trades in IBKR and Schwab, and report the results back over time. It will take months, I won't be able to fund IBKR until early November.
- Kriegsspiel
- Executive Member
- Posts: 4052
- Joined: Sun Sep 16, 2012 5:28 pm
Re: Stock and ETF brokerage costs plunge
Cool. It sucked when they took the Vanguard ETFs off their commission-free list. Although I guess it doesn't matter to me if I get around to moving my HSA to Fidelity.
You there, Ephialtes. May you live forever.
Re: Stock and ETF brokerage costs plunge
More today from Paul Novell. Maybe I don't need to test out IBKR. It is darned convenient to have most of my stuff at Schwab. To place MOC orders at Schwab, you need to use Street Smart Edge trading platform. Can't do it from the web or mobile.
"One comment this week on developments in the discount broker space. If you haven't heard by now, you can trade stocks, options, and ETFs for free now at a lot places, even at the big boys; Vanguard, Schwab, Interactive Brokers, and TD Ameritrade now offer $0 commissions. It's a great development for investors, especially TAA and quant investors. With this development there has been some renewed concern of brokers selling order flow to make money. Yep, that happens. But I wanted to point out a few things; it is not a slam dunk argument that it is bad for small investors (see this thread), and most importantly you can avoid any concerns by using market on close (MOC) orders as I advocate doing anyway. With MOC orders your orders get executed at the NYSE, there's no dark pool shenanigans, and you get the closing price, without any bid/ask spread. And now with zero commissions. What's not to love about that?
As always, send any questions or comments my way.
Regards,
Paul"
"One comment this week on developments in the discount broker space. If you haven't heard by now, you can trade stocks, options, and ETFs for free now at a lot places, even at the big boys; Vanguard, Schwab, Interactive Brokers, and TD Ameritrade now offer $0 commissions. It's a great development for investors, especially TAA and quant investors. With this development there has been some renewed concern of brokers selling order flow to make money. Yep, that happens. But I wanted to point out a few things; it is not a slam dunk argument that it is bad for small investors (see this thread), and most importantly you can avoid any concerns by using market on close (MOC) orders as I advocate doing anyway. With MOC orders your orders get executed at the NYSE, there's no dark pool shenanigans, and you get the closing price, without any bid/ask spread. And now with zero commissions. What's not to love about that?
As always, send any questions or comments my way.
Regards,
Paul"
- dualstow
- Executive Member
- Posts: 14308
- Joined: Wed Oct 27, 2010 10:18 am
- Location: synagogue of Satan
- Contact:
Re: Stock and ETF brokerage costs plunge
Mentioned in the Wall St Journal today: Schwab and other brokerages will still make money off you from poor-yielding sweep accounts holding your uninvested cash.
Re: Stock and ETF brokerage costs plunge
IMO this is a great trend for retail investors.
As a 4x25 PP investor who rebalances annually, commissions have always been a minor consideration, and payments for my order flow are an extremely tiny consideration. Cash is commission-free so I'm only making a maximum of 3 trades per account per year, and in practice usually 0-1 trades per account per year. The order flow thing seems like more of a problem for day traders.
Does anyone think one of these brokers has become the slam-dunk best for PP investors?
As a 4x25 PP investor who rebalances annually, commissions have always been a minor consideration, and payments for my order flow are an extremely tiny consideration. Cash is commission-free so I'm only making a maximum of 3 trades per account per year, and in practice usually 0-1 trades per account per year. The order flow thing seems like more of a problem for day traders.
Does anyone think one of these brokers has become the slam-dunk best for PP investors?
Re: Stock and ETF brokerage costs plunge
I placed an MOC sell order today, and I absolutely got the closing prices today, down to the penny. No bid/ask spread. But... the fractional shares did not sell! So now I have some orphaned fractions, I have to buy 1 whole share of each ticker, wait two days for it to settle, then sell. In future, I won't sell my last whole share, I'll sell so I have 1.xxx left over, then clean up the next day.ochotona wrote: ↑Fri Oct 04, 2019 4:49 pm More today from Paul Novell... you can avoid any concerns by using market on close (MOC) orders as I advocate doing anyway. With MOC orders your orders get executed at the NYSE, there's no dark pool shenanigans, and you get the closing price, without any bid/ask spread. And now with zero commissions. What's not to love about that?
Also, I placed simultaneous buy & sell orders, but my buy order was only 98% as big as my sell order, so as to avoid a sudden price move at the close resulting in me getting jammed up with a negative cash balance and a trading violation. Again, I can do next-day clean-up and soak up left-over cash. But it's fine for me to avoid 98% of the payment for order flow PFOF nonsense. I might even be able to cut it closer, but 98% is OK. I figure it's very unlikely that each symbol moves against me by 1% in the last minutes of the day.
I placed the trades at Schwab on their trading platform Street Smart Edge, but Fidelity lets you do it on their regular website.
Re: Stock and ETF brokerage costs plunge
Payment for order flow should be **the** consideration if you have a larger account.KevinW wrote: ↑Tue Oct 08, 2019 9:34 pm IMO this is a great trend for retail investors.
As a 4x25 PP investor who rebalances annually, commissions have always been a minor consideration, and payments for my order flow are an extremely tiny consideration. Cash is commission-free so I'm only making a maximum of 3 trades per account per year, and in practice usually 0-1 trades per account per year. The order flow thing seems like more of a problem for day traders.
Does anyone think one of these brokers has become the slam-dunk best for PP investors?
It’s kinda like when you go to a car dealer for repairs and you think the Coke and pastries in the waiting area are “free.”
Re: Stock and ETF brokerage costs plunge
Fidelity... Now zero commissions!
Re: Stock and ETF brokerage costs plunge
Boom! I'm really happy to see that. And really glad that I wasn't tempted to switch funds recently just because they didn't have commissions. Being slow to make changes paid off.
I imagine that BlackRock probably got a lot of business through Fidelity because they had a deal to not change commissions on iShares ETFs. Now that the playing field is leveling, I wonder if this will eventually force them to also lower their ER's to be more competitive with some of the other ETF providers like Schwab.
Gotta love competition.
Re: Stock and ETF brokerage costs plunge
Double checked, no MOC on regular Schwab website. Also, there was a bug which caused the fractional shares to not trade, they took care of them for me by hand the next day, at the same price. Not great, but whatever.
- InsuranceGuy
- Executive Member
- Posts: 425
- Joined: Sun Mar 29, 2015 1:44 pm
Re: Stock and ETF brokerage costs plunge
[deleted]
Last edited by InsuranceGuy on Mon Mar 08, 2021 6:00 pm, edited 2 times in total.
Re: Stock and ETF brokerage costs plunge
1.4 cents per share ding. That sucks. Glad I found out how to do MOC. The cash thing sucks.
- InsuranceGuy
- Executive Member
- Posts: 425
- Joined: Sun Mar 29, 2015 1:44 pm
Re: Stock and ETF brokerage costs plunge
[deleted]
Last edited by InsuranceGuy on Mon Mar 08, 2021 6:00 pm, edited 1 time in total.
Re: Stock and ETF brokerage costs plunge
What does it work out to on a per share basis? Anything like 1.4 cents per share?InsuranceGuy wrote: ↑Sat Oct 12, 2019 10:15 am The average price improvement is $5.80/trade over 11 trades in the past 12 months.
Everyone going to zero commissions really starts putting the focus on smaller and smaller and finer and finer points about order flow, customer service, online user experience, do you like the cookies & coffee they serve in the local branches, etc. Here's a summary of the war in my brain. I don't know what to do. Maybe move my two actively traded accounts to Fidelity, and leave the quiet ones at Schwab. $25 hostage fee.
- InsuranceGuy
- Executive Member
- Posts: 425
- Joined: Sun Mar 29, 2015 1:44 pm
Re: Stock and ETF brokerage costs plunge
[deleted]
Last edited by InsuranceGuy on Mon Mar 08, 2021 6:00 pm, edited 1 time in total.
Re: Stock and ETF brokerage costs plunge
So the momentum strategies I use in my VP have 2.5 trades per year on average. This would imply that Schwab makes from me, on average, about $770 per year in lost price improvements. If I run around that by sending 99% of the trades through MOC, and do next-day clean-up with regular market buy orders (I sell an ETF using MOC, but only buy 98% of the replacement ETF using MOC so as not to run out of cash), they're down to 1% of that, or $7.70 per year. I can live with that. Even if it's 1.4c per share not 0.6c per share, that's $18 per year.InsuranceGuy wrote: ↑Sat Oct 12, 2019 11:38 am EDIT: Nice comparison chart. From my perspective: I have never been to a branch so never had a cookie (that may change now that I know), the Fidelity website seems to work well for me, I agree on the 2% Fidelity card and personally use the Alliant CU cash back card that has no ATM/foreign trans fees. I have no vested interest in any of the brokerage houses, I use Fidelity and have used E-Trade, Merrill, Schwab, and Vanguard in the past.
But I still might move!
-
- Senior Member
- Posts: 126
- Joined: Sat Sep 24, 2016 5:39 pm
- Location: NJ and India
Re: Stock and ETF brokerage costs plunge
Fidelity will reimburse the fee that another brokerage may charge you to transfer funds to Fidelity. Just need to show Fidelity your statement from the other company confirming the fee/charge.
Re: Stock and ETF brokerage costs plunge
Where do present the statement? Online or at a branch?thisisallen wrote: ↑Sat Oct 12, 2019 10:34 pm Fidelity will reimburse the fee that another brokerage may charge you to transfer funds to Fidelity. Just need to show Fidelity your statement from the other company confirming the fee/charge.
Re: Stock and ETF brokerage costs plunge
I don't have a Schwab account so I can't speak to that brokerage's features in this area, but a few additions to the Fidelity positive list:
1) A cash account with an ATM card where you are reimbursed for all ATM fees. (disadvantage: the sweep pays almost zero interest, but on the other hand it is FDIC insured for a ridiculously large amount, like $600K).
2) A brokerage account that can be firewalled from long-term investments and that can do everything that a normal online checking account does except for ATM withdrawals - and you can set the sweep to a money market fund. Pairs well with the cash account. Elegantly gets around rules limiting savings account transactions that force you into a dual bank account structure.
3) An completely-investible HSA that neatly avoids having to deal with two institutions, logins etc.
Their website software is the one real negative of Fidelity. Glitches are common and it is often awkward to use. I hope they are planning to update it.
1) A cash account with an ATM card where you are reimbursed for all ATM fees. (disadvantage: the sweep pays almost zero interest, but on the other hand it is FDIC insured for a ridiculously large amount, like $600K).
2) A brokerage account that can be firewalled from long-term investments and that can do everything that a normal online checking account does except for ATM withdrawals - and you can set the sweep to a money market fund. Pairs well with the cash account. Elegantly gets around rules limiting savings account transactions that force you into a dual bank account structure.
3) An completely-investible HSA that neatly avoids having to deal with two institutions, logins etc.
Their website software is the one real negative of Fidelity. Glitches are common and it is often awkward to use. I hope they are planning to update it.
Re: Stock and ETF brokerage costs plunge
Agree completely on the Fidelity website. It's green and mean.
-
- Senior Member
- Posts: 126
- Joined: Sat Sep 24, 2016 5:39 pm
- Location: NJ and India
Re: Stock and ETF brokerage costs plunge
Definitely online. Don’t know about the branch.ochotona wrote: ↑Sun Oct 13, 2019 5:30 amWhere do present the statement? Online or at a branch?thisisallen wrote: ↑Sat Oct 12, 2019 10:34 pm Fidelity will reimburse the fee that another brokerage may charge you to transfer funds to Fidelity. Just need to show Fidelity your statement from the other company confirming the fee/charge.
https://click.fidelityinvestments.com/? ... 9b3036dd62
Re: Stock and ETF brokerage costs plunge
Will get cookies at branch