Stock and ETF brokerage costs plunge

Discussion of the Stock portion of the Permanent Portfolio

Moderator: Global Moderator

User avatar
ochotona
Executive Member
Executive Member
Posts: 2739
Joined: Fri Jan 30, 2015 5:54 am

Stock and ETF brokerage costs plunge

Post by ochotona » 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.
User avatar
dualstow
Executive Member
Executive Member
Posts: 8458
Joined: Wed Oct 27, 2010 10:18 am
Location: next to emotional support peacock
Contact:

Re: Stock and ETF brokerage costs plunge

Post by dualstow » Wed Oct 02, 2019 7:52 am

Pasting from the Left Eating Itself thread:
pugchief wrote:
Tue Oct 01, 2019 5:41 pm
dualstow wrote: (signature)Breaking: Schwab to end trading commissions
Great news for everyone except people who own Schwab stock.
(dual.) O0 true! Or stock in similar firms. They fell, broadly.
sophie wrote:
Wed Oct 02, 2019 7:30 am
Just got an email that TD Ameritrade is also eliminating all commissions on stocks and ETFs.

C'mon Fidelity...give!!!!!!
Good morning, Tyler, et al, it's 52F in Austin, going up to 80º by 3pm; Dallas high of 74º. Have a swell day.
Heat-seeking drone finds missing 6-year-old Minnesota boy in cornfield (No, not a missile)
User avatar
Kbg
Executive Member
Executive Member
Posts: 1345
Joined: Fri May 23, 2014 4:18 pm

Re: Stock and ETF brokerage costs plunge

Post by Kbg » Wed Oct 02, 2019 8:43 am

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.
Awesome! Look forward to your analysis.
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 1749
Joined: Sun Sep 16, 2012 5:28 pm

Re: Stock and ETF brokerage costs plunge

Post by Kriegsspiel » Wed Oct 02, 2019 4:36 pm

dualstow wrote:
Wed Oct 02, 2019 7:52 am
sophie wrote:
Wed Oct 02, 2019 7:30 am
Just got an email that TD Ameritrade is also eliminating all commissions on stocks and ETFs.

C'mon Fidelity...give!!!!!!
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.
To die, to sleep
To sleep, perchance to dream; ay, there's the rub
For in that sleep of death what dreams may come
User avatar
ochotona
Executive Member
Executive Member
Posts: 2739
Joined: Fri Jan 30, 2015 5:54 am

Re: Stock and ETF brokerage costs plunge

Post by ochotona » Fri Oct 04, 2019 4:49 pm

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"
User avatar
dualstow
Executive Member
Executive Member
Posts: 8458
Joined: Wed Oct 27, 2010 10:18 am
Location: next to emotional support peacock
Contact:

Re: Stock and ETF brokerage costs plunge

Post by dualstow » Fri Oct 04, 2019 5:48 pm

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.
Good morning, Tyler, et al, it's 52F in Austin, going up to 80º by 3pm; Dallas high of 74º. Have a swell day.
Heat-seeking drone finds missing 6-year-old Minnesota boy in cornfield (No, not a missile)
User avatar
ochotona
Executive Member
Executive Member
Posts: 2739
Joined: Fri Jan 30, 2015 5:54 am

Re: Stock and ETF brokerage costs plunge

Post by ochotona » Fri Oct 04, 2019 6:53 pm

dualstow wrote:
Fri Oct 04, 2019 5:48 pm
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.
They absolutely do. You need to put it somewhere.
User avatar
KevinW
Executive Member
Executive Member
Posts: 932
Joined: Sun May 02, 2010 11:01 pm

Re: Stock and ETF brokerage costs plunge

Post by KevinW » 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?
User avatar
ochotona
Executive Member
Executive Member
Posts: 2739
Joined: Fri Jan 30, 2015 5:54 am

Re: Stock and ETF brokerage costs plunge

Post by ochotona » Wed Oct 09, 2019 5:11 pm

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?
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.

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.
User avatar
Kbg
Executive Member
Executive Member
Posts: 1345
Joined: Fri May 23, 2014 4:18 pm

Re: Stock and ETF brokerage costs plunge

Post by Kbg » Wed Oct 09, 2019 11:11 pm

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?
Payment for order flow should be **the** consideration if you have a larger account.

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.”
User avatar
ochotona
Executive Member
Executive Member
Posts: 2739
Joined: Fri Jan 30, 2015 5:54 am

Re: Stock and ETF brokerage costs plunge

Post by ochotona » Thu Oct 10, 2019 6:45 pm

Fidelity... Now zero commissions!
User avatar
pugchief
Executive Member
Executive Member
Posts: 2779
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: Stock and ETF brokerage costs plunge

Post by pugchief » Thu Oct 10, 2019 8:09 pm

ochotona wrote:
Wed Oct 09, 2019 5:11 pm
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?
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.

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.
I'm pretty sure if you sell all of your shares, the fractional ones will settle at the same price in a couple of days. Chat with a Schwab rep to clarify, but that has always been the case for me at all brokers.

I'm also pretty sure Schwab offers MOC orders on their regular platform.
Post Reply