FreeTrade's Order Execution... am I paranoid? ("Invisible" Fees)

T

taumeson

I dont want to beat a dead horse here, but I was wondering about FreeTrade/Ameritrades 's Auto-Route Order Execution... and wondering just how un-optimal my trades through them may be?

What's making me paranoid is Freetrade's commision rate (Free for 20 trades etc etc) and the following:

Quote from FreeTrade's Terms and Conditions Help File:
Stock orders are routed via an electronic matrix to a listed, Nasdaq, or over-the-counter agent, ECN or other market participant, depending upon the security being traded, the designated market session and other factors. Freetrade and Ameritrade cannot accept requests to route orders to a specific exchange or market for execution. Ameritrade receives cash payment for routing my stock orders for execution to certain agents on specific listed, Nasdaq, and over-the-counter securities. These agents may be market makers or other market participants and may act as principal and buy, sell or hold securities for their own proprietary accounts and may make money from the "spread."
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And their "SEC Rule 11Ac1-6 Order Disclosure" (PDF) : http://www.advancedclearing.com/html/CLR2054.pdf

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Am I just too paranoid?

Dont get me wrong, I am using FreeTrade right now, and I think it's great for casual traders, and certainly no worse than using Ameritrade...

I'm just wondering if being charged a nice hefty/share commission commision without knowing it.
 
Quote from taumeson:

Am I just too paranoid?

I'm just wondering if being charged a nice hefty/share commission commision without knowing it.
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No, you are not. And, yes, you are. Nothing is free in this world, especially in the markets. Those guys on the other side of your order are not trading with you just for their health. They pay Freetrade for your order, for a reason. Can you guess what that reason is?
 
Quote from taumeson:

I dont want to beat a dead horse here, but I was wondering about FreeTrade/Ameritrades 's Auto-Route Order Execution... and wondering just how un-optimal my trades through them may be?

What's making me paranoid is Freetrade's commision rate (Free for 20 trades etc etc) and the following:

Dont get me wrong, I am using FreeTrade right now, and I think it's great for casual traders, and certainly no worse than using Ameritrade...

I'm just wondering if being charged a nice hefty/share commission commision without knowing it.
More...

If you're serious about trading I'd find a direct access firm. After you make your 20 "free" trades with Freetrade then what? I'd never trade through anyone where I don't have control over how my order is routed.
 
I've said it before, and I'll say it again: as long as I get filled quickly at the inside I couldn't care less who takes the other side of my trade, NITE, Saddam Hussein, or anyone else. I almost always get filled in 1-2 seconds, not quite as fast as IB, but not far behind, either.
 
Quote from stevebec:

I've said it before, and I'll say it again: as long as I get filled quickly at the inside I couldn't care less who takes the other side of my trade, NITE, Saddam Hussein, or anyone else. I almost always get filled in 1-2 seconds, not quite as fast as IB, but not far behind, either.
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That's what I thought when I first started the account, but the more I think about it...

Here's why: Sure they fill my order fast... but what if they fill my buy order @ 30.05 when if I was able to pick my own routing (or use an automated routing that trys to find you the best price) your fill could have been @ 30.04? or even worse, @ 30.03?

For me, even a $0.01 difference in price means an extra $16 I 'loose' every transaction... I am trading in lots of 1600 now.
 
DID they fill you at .05 when you could have gotten .04, or are you afraid they MIGHT fill you a penny or 2 over. I had the same concerns, but over the course of a couple thousand trades, I've never seen it happen. Get level 2 (they only charge $5 for it) and watch what happens to your order. My only complaints so far are:


1. Fills in the first 15 minutes or so are SLOW. I generally avoid trading the open anyway, so this doesn't really bother me.

2. They are quite "generous" with stops. Stops are triggered when either the price hits your stop, OR the inside bid does. I have to use stops as I work full time so this does bug me as I've been hit at the bottom of a dip when the price stayed a couple of pennies above my stop but the bid touched it, and when some jerk hit the bid for 1 lot at some obscure ECN 10 cents below my stop and causing me to get filled 14 cents above the print that triggered my stop.

3. Non-marketable limit orders on NYSE stocks, instead of being added to the NYSE book, are sent somewhere like mwse or phix, where they're probably less likely to get hit than in NY.

Compare your fills to level II and T&S and see if you think you're getting a raw deal, but I've never had a problem.
 
Quote from stevebec:

DID they fill you at .05 when you could have gotten .04, or are you afraid they MIGHT fill you a penny or 2 over. I had the same concerns, but over the course of a couple thousand trades, I've never seen it happen. Get level 2 (they only charge $5 for it) and watch what happens to your order. My only complaints so far are:


1. Fills in the first 15 minutes or so are SLOW. I generally avoid trading the open anyway, so this doesn't really bother me.

2. They are quite "generous" with stops. Stops are triggered when either the price hits your stop, OR the inside bid does. I have to use stops as I work full time so this does bug me as I've been hit at the bottom of a dip when the price stayed a couple of pennies above my stop but the bid touched it, and when some jerk hit the bid for 1 lot at some obscure ECN 10 cents below my stop and causing me to get filled 14 cents above the print that triggered my stop.

3. Non-marketable limit orders on NYSE stocks, instead of being added to the NYSE book, are sent somewhere like mwse or phix, where they're probably less likely to get hit than in NY.

Compare your fills to level II and T&S and see if you think you're getting a raw deal, but I've never had a problem.
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I feel a bit better after reading this, and today I found that they filled my Short S for a penny better than my limit, so I think it's not qute as bad as I thought...

Good insight SteveBec
 
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