I wonder how many traders you know who consistently make money on big unhedged bets. I have heard of all the big hedge fund managers who left the business in the last few years. Most of the money made in the markets on a short term basis is made by making markets and providing liquidity.
Is rebate trading with near zero commissions the future of active trading?
- Thread starter tm689
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I would think people would have to find a way to make money doing it. Either that or they trade stocks with wider spreads. You can't fight the laws of economics and probabilities.
What made SOES better? The answer is that when SOES first came out it gave the daytraders a speed advantage since the market makers had to use SelectNet to get stock as the market moved. Once everyone got access to instant executions that SOES advantage was gone. Also when SOES first came out the spreads were in sixteenths. That means your average proft per trade was significantly higher.
The brokers catering to daytraders will have to come up with ways for their customers to compete with firms like Virtu, otherwise they will simply cease to exist. The advantage the day trading firms have is they will have humans to monitor the stocks they are trading.
They simple answer is yes if you include short stock rebate and you have critical mass of at least $5 to $10 million or more. The yes becomes a no if you turnover very frequently and trade a ton. The answer is also no if you portfolio is dominated by futures trading. The real question is will commission revenue start to approach zero on some accounts ? The answer becomes yes if the brokerage firm has another profit center in the account. Fees and data charges will only get worse and will remain a persistent drag.
The brokerage firms will likely have to take a slice of the rebates and hope for volume to make up for their lost commission revenue. Trading a lot becomes a losing proposition if you are hitting bids and lifting offers. Your transactions costs will put you out of business. The only way to make money trading a lot is to try to capture the spread and the rebates. That is what is called positive or reverse transaction costs (in other words profiting from every trade).
close enough, but there was a lot more to it. AND many spreads were 1/8 and 1/4. Guess you read about it and weren't there, you wouldn't forget that
"There were many more inefficiencies in the stock market back then. That was before Reg NMS so it was possible to arb the ECNs like Island, Brut, and Btrade. There are still inefficiencies in the markets but they are much harder to find and they disappear much more quickly."
Liquidity is 10 to 20X from back then and transaction costs? Transaction costs were so high back then arbing was totally an academic arguement. Typical 1000 shares at $50 was $800 to $1200 commission. Today most are paying about $5 to do that trade. Correct about no reg NMS, but you still had and have ITS.
Liquidity is 10 to 20X from back then and transaction costs? Transaction costs were so high back then arbing was totally an academic arguement. Typical 1000 shares at $50 was $800 to $1200 commission. Today most are paying about $5 to do that trade. Correct about no reg NMS, but you still had and have ITS.