Direct access broker for infrequent trader

Jacob Reynolds · Dec 17, 2005

So this last month I have been looking for a new online stock brokers to use for my 2005 IRA money. During the process, I decided that I want to try a direct access broker, just for fun, because I am interested in how the process works. I will probably put my IRA money in Scottrade rather than a direct access broker, because they have no annual IRA fee and all of the direct access brokers have an annual IRA fee, and put some non-IRA money in a direct access broker instead. I am only going to put 3 or 4 thousand dollars in the direct access broker to start because I am satisfied with my regular old online broker (Siebert.net). Given that I am only going to commit a few thousand dollars at first, and will likely be a very infrequent trader (probably less than 6 times per year, all stocks and no options), I have been focusing on firms few nuisance fees, no minimum trading requirements, and so forth. I am a computer modeler for a living, so I am not afraid of complicated user interfaces and or computer procedures. My search led me to MBTrader, which seems to meet all of my needs. However, I thought I would run this choice by the discussion board before I open an account to see if anyone with more experience has a bettor choice or any comments. I have checked out the broker reviews section of Elitetrader.com, but the people who post there tend to (understandably) be focused on frequent traders. What do you think?

Jake

osorico · Dec 17, 2005

I will probably put my IRA money in Scottrade rather than a direct access broker, because they have no annual IRA fee and all of the direct access brokers have an annual IRA fee

When/If your trading frequency ever changes, don't let measly fees rule your decision. At that point, IRA annual fees become non-issue given significantly better executions and trade types available.

More importantly, is the commission per trade. If you are trading only a few round lots per trade (or worse, less than round lot) Scottrade $7.00 ($14.00 + a few pennies for SEC fees per R/T) commish is very high. Your trade size determines whether Scottrade commish is competitive or not.

My search led me to MBTrader, which seems to meet all of my needs.

I can personally vouch for MB Trading. They are a good firm and a good choice, IMO, given your current needs.

Good luck.

Don Bright · Dec 17, 2005

Most people don't understand what "Direct Access" really is. Retail traders don't have direct access, only licensed traders of a Broker Dealer....regardless of what your broker tells you. It may not be a big deal in your case...but for reference: From Computer Clearing Services, www.ccls.com (no connection with Bright Trading).

What is the difference between Internet and Direct Access Trading?

Internet Trading (or Internet Order Entry) is defined as order entry via web based software. The customer logs on to the web site, and he/she can enter orders via pre defined Market Markers. The customer cannot choose how to route orders. Orders are placed via a three-step procedure. Step one is to bring up the order entry screen; step two is to enter the buy/sell and number of shares on this screen; and the third step is a screen that asks to confirm or abandon. The procedure has to be repeated with each subsequent order.

Direct Access Trading involves a terminal with a direct Internet connection. The customer has a logon screen that provides real-time quotes, Level II, charts, news, etc. The terminal also has trading software connected to the quotes. The customer can choose where to route the buy/sell orders (various ECNs or Market Makers). The Direct Access terminal provides many additional features, such as a trade blotter, real time P&L, and security positions.

All the best,

Don

joeyata1 · Dec 17, 2005

no question don but for the guy doing less than 10 trades a day all that means little. interactive brokers at .005 all in no sec fee is as good a deal as any trader doing 100k a day with any direct access broker gets. i trade with a huge direct access firm and alos have 2 ib accounts and i assure you ib's nyse and smart order fills match any direct access fills in the industry. the platform is a little clunky but there fills are very good

GTC · Dec 18, 2005

MBTrading has fees for account transfer-out, IRA maintenance and closing. MBTrading's equity commissions are higher than IB's in general. IB has a minimum monthly fees of $3 (for the clients who are under 25 years of age) or $10 (for 25 and over) minus commissions.

riskarb · Dec 18, 2005

Don -- IB qualifies as a Direct Access broker under your definition, excluding the BD requirement. Direct access need not be limited to a BD/JBO.

Don Bright · Dec 19, 2005

Quote from riskarb:

Don -- IB qualifies as a Direct Access broker under your definition, excluding the BD requirement. Direct access need not be limited to a BD/JBO.

Yes, and no...orders are still routed to IB...even if for a nano-second, to verify funds, etc.

I am not disagreeing with most of this discussion...I have sent many a casual trader to IB, TS, and others.

Don

riskarb · Dec 19, 2005

Quote from Don Bright:

Yes, and no...orders are still routed to IB...even if for a nano-second, to verify funds, etc.

I am not disagreeing with most of this discussion...I have sent many a casual trader to IB, TS, and others.

Don

There are haircut checks at Bright? Shit, I can enter 1,000,000 IBM with a $25k deposit at Bright? Redi's going to route that order? Nice...

murray t turtle · Dec 19, 2005

Quote from Jacob Reynolds:

So this last month I have been looking for a new online stock brokers to use for my 2005 IRA money. During the process, I decided that I want to try a direct access broker, just for fun, because I am interested in how the process works. I will probably put my IRA money in Scottrade rather than a direct access broker, because they have no annual IRA fee and all of the direct access brokers have an annual IRA fee, and put some non-IRA money in a direct access broker instead. I am only going to put 3 or 4 thousand dollars in the direct access broker to start because I am satisfied with my regular old online broker (Siebert.net). Given that I am only going to commit a few thousand dollars at first, and will likely be a very infrequent trader (probably less than 6 times per year, all stocks and no options), I have been focusing on firms few nuisance fees, no minimum trading requirements, and so forth. I am a computer modeler for a living, so I am not afraid of complicated user interfaces and or computer procedures. My search led me to MBTrader, which seems to meet all of my needs. However, I thought I would run this choice by the discussion board before I open an account to see if anyone with more experience has a bettor choice or any comments. I have checked out the broker reviews section of Elitetrader.com, but the people who post there tend to (understandably) be focused on frequent traders. What do you think?

Jake

==========
Jake;
don't trade that frequently myself, and with you computer work;
Interactive Brokers is fine . I am not even sure what IB small service charge for minimum month activity is since they lowered commissions again ;
but with overall performance ,still like them.
Like my regular old online broker, especially thier charts;
OXPS,
even though dont trade options that much.

I also like Don Brights timely remarks;
that is the magazine article he wrote several year ago about the trader that did well with takeover sectors,mainly because of hard , diligent work . Don't know what frequency of his trades was?????

nitro · Dec 19, 2005

Quote from riskarb:

There are haircut checks at Bright? Shit, I can enter 1,000,000 IBM with a $25k deposit at Bright? Redi's going to route that order? Nice...

Right,

Any time you trade electronically, it is routed to software that does simple checks, like margin, whether prop or retail. It adds about 1 millisecond to the transmit time, if that.

That is one of the reasons IB will not sponsor you to lease a seat - once a clearing firm does that, the client can walk into any pit on the exchage where that seat can trade and trade any size he wants, and the clearing firm is responsible for the clients order regardless of size.

The important issue is not "direct access" because even the shit brokers are DA today, but whether the order gets a chance to be executed/displayed on any exchange without broker interference to routing decisions.

IB will instantly fill you on the NBBO without routing to an exchange if it wants your order and you choose SMART route, or route to the exchange with NBBO if it does not want your order, or you can choose your own route and force the order to go to an exchange. Some brokers that get paid for order flow will only route to a particular exchange. You want to avoid those like the plague.

nitro