Commission free trading with direct access
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IBPro margin rate is 2.05% (for 1-3M loan size) vs. 5.0% on Fidelity. That is a ridiculously large difference. IBPro also pays around 1% for idle cash...what does Fidelity pay?
On the execution side, my experience is that when you have a large commission bill at IB, it's typically because portfolio turnover is high. Pay for order flow will eat into a lot of your headline commission savings. it really doesn't take a lot to see your savings become a huge cost over time.
UNLESS you 1) trade via market on close orders (where everybody gets the same fill) and 2) don't use much margins
On the execution side, my experience is that when you have a large commission bill at IB, it's typically because portfolio turnover is high. Pay for order flow will eat into a lot of your headline commission savings. it really doesn't take a lot to see your savings become a huge cost over time.
UNLESS you 1) trade via market on close orders (where everybody gets the same fill) and 2) don't use much margins
For my trading style I think I can save money at Fidelity. While I trade at the open, close and intraday. The bulk of my trading centers around MOC. I have high turnover, about $2M to $3M worth every day. And Fidelity sweeps the unused cash automatically to their money market fund SPAXX which is currently yielding 1.7%. I don't trade on margin as in levered trading. But I do use the reg t type margin to avoid t+2 settlements. That's the only thing I am unsure about, whether Fidelity charges that as a loan at 5%. I suppose I should ask them.
Are MOC/MOO trades free? If it is, l wander if these orders are guaranteed to be filled.
It is free
Interesting. They can't make money on these via PFOF. So how can they guarantee fills at the official close? I suspect some of your orders will go unfilled.
I would assume they would fill my entire MOC order on a best efforts basis - I did not see any documentation from Fidelity that their market on close order is part of the auction. But I would be ok with a bit if slippage once in a while. My trading is not high frequency and is not super sensitive to fill quality
if you don't use margins and most of your trades are MOC/MOO, then you would probably save a boatload of money trading on zero commission vs. IBPro.
Does anyone know how HFT shops make money on buying MOC orders?
I don't know, but It all depends on whether HFT or internalizer guarantees fills at official price or not. The only way to guarantee is to participate in the auction at the exchange - which costs money.
Now if you simply cancel back the unfilled shares, then its easy - let's say customer sent buy MOC. The official close is $10.00 but the price sells off to $9.75. So they can buy there and sell to you at $10.00 for arbitrage (don't forget futures can be used as proxy or hedge). If on the other hand, price rips to $10.25 they simply cancel your orders. Keep in mind that they can use the regular flow to pair against and that these orders need to be submitted ahead of time.
BTW, MOO/MOC implies that fills are at official price and in full, there's no slippage or partials with real MOO/MOC - that is the reason they exist, otherwise you can simply use regular orders.
No, the free commission on Tradestation is not DMA
they need the kickback of $0.52 per order from Wolverine and Citadel (as disclosed in their documents)
People need to realize that brokers like Lightspeed who offer Direct Market Access are actually cheaper than HFT FRONTRUN ZERO COMMISSION BROKERS.