Low trading commission (and cost) brokerages for high frequency equity trading:

G

Guava

Hello,

here, by high frequency, I mean about 1000 trades/day for about 100 stock symbols. So, it will be about 20,000 trade/month and at minimum order size of 100, it is 2 million shares/month.

I have been searching for brokerages which offer really low commissions to individuals (i.e. comparable to what banks/hedge-fund systems get : an order of 0.001 $/share or less which is like 10 cents/100-share or cheaper ) . Obviously, the trading cost needs to consider the 'opportunity' costs as well, but one needs really low commission brokerage for a high frequency operation (along with a good system etc.).

I found IB one of the best at 0.0035 $/share (using the unbundled US stocks) but their minimum per trade is $ 0.70. So, if my orders are of 100 shares, I will pay 0.70 one way which makes the round-trip cost of 1.40 $, and i will really like it to be less than 0.50 $, assuming I actually get filled at the good price. (The lower commission will become meaningless if my fill rate for limit orders is really low or if I get bad price for market orders).

These commissions can kill most of the high frequency systems and I am sure the banks/hedge-funds pay a fraction.

So are there brokerages which charge a lot less than 0.007 $ /share if the order size if 100 shares ?

Thanks,
Guava
 
Genesis, Lightspeed and Lime are three that seem to cater to this type of market. Prop firms might be OK, too, for what you're asking about, if you don't mind fulfilling their requirements, which may include becoming licensed.

There are a lot of other options out there when it comes to brokerages, not to mention the choice of platform. I do a lot of research before choosing a brokerage/platform for a particular need of mine.
 
Can you define "High Frequency" a little more for us? 1000 trades across 100 symbols is only 10 trades per symbol a day.

Do you say high freq because you need to send out orders for all 100 sybmols at the same time (so its high freq because you can't click all those with a mouse at once)?

How long are you holding for? What is your average profit per trade? Also how much capital are you willing to put down?

By "banks/hedge-funds" I assume you mean the banks like Goldman/JPM, etc. trade for less because they are members of the exchange and for hedge funds they are either firm/bank sponsored or they put down a lot of capital.

A lot of prop shops can put you in the range of IB as long as you have your series 7 and put down $25k+
 
Thanks for the replies.

I didn't know I could trade through prop firms. Do you know any name that allows this ?

Occam: lightspeed does not better IB for 200+ share/order but it is better for 100 share/order range. I will look into Genesis and Line again. They don't clearly specify the commissions on the web page (or I hadn't spend enough time searching). Will post after I find out.

Winston: It is not ultra-high where you talk about sub second resolutions. The holding period of few minutes (say 2 minutes) to an hour or two. The number of trades/day can actually vary widely and also the number of symbols. What I mentioned was just to give an idea. 2000 orders/day is about an oder per minute, which I would call a high frequency.

Thanks again,
 
Quote from Guava:

Thanks for the replies.

I didn't know I could trade through prop firms. Do you know any name that allows this ?

Occam: lightspeed does not better IB for 200+ share/order but it is better for 100 share/order range. I will look into Genesis and Line again. They don't clearly specify the commissions on the web page (or I hadn't spend enough time searching). Will post after I find out.

Thanks again,
More...

Many firms allow for prop trading -- just look in the prop trading section of this site:

http://www.elitetrader.com/vb/forumdisplay.php?s=&forumid=15

As far as these other firms are concerned that don't list commissions, this is typical. Most higher-volume firms only offer deals specific to you, as it depends highly on volume, etc. My guess is that you've never used this strategy before? In that case, you may be basing it on backtesting results, which aren't necessarily realistic, so you may not know how well it works until you start using it. Nor will you know your volume. Which brings me back to another point, that your pricing will depend on volume, amongst other factors. Firms will often give you a tiered deal, where you are charged specific amounts per share depending on your volume in a given month.

Not saying this is you, but for someone with a new/untested strategy, they might want to start out with a simpler brokerage/deal and then look for an optimal situation/brokerage after having gained more experience.
 
Occam, thanks for the info. You guessed it right. I have never traded with an automated system. But I have worked those type of hedge funds in the past. I will stick with IB for now.
 
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