Moving To A New Broker, What's a Cancel Fee?

[JesseJamesFinn]

Hi!


I am a old horse that needs to protest against his current brokers for not being cool. I move my money and soon after being in the penalty box for a month of two, they will offer something nice to get me back!

I am looking at some new ideas and came across the list that some brokers (was it LightSpeed or SpeedTrader) that charge you a price to cancel a order sent out through INET and ARCA. Is this correct?


My brokers are not the cutting edge like the majority of traders here have but I can't understand how canceling a order in a stock I am thinking that I can get a better price for, is a valid transaction. Many of you change your orders quicker than me and don't get this type of profit castration! Is this something new or have I been married too long to my brokers of "Power Etrade", Fidelity Active Trader" and a few other cheap brokers I use for continuity sakes, I got a email from "LightSpeed" saying "our platform is up and running again, trading is available"



Tell me I am reading this wrong, I dumped Trade Station because of the cost of their trades was super high when you trade a block of 10,000 to 100,000 of stocks between $.01 to $2.99 per share. Options House and ScotTrade are screwballs for Sub $2 buck stocks. How does a Broker justify a "cancellation fee"?


I am looking for another Direct Access Broker who will provide Rebates for ECNs (providing liquidity) without charging me $60 bucks a trade for a block of shares even after the Rebate. I had a broker once "MyTrack" who charged me $12.50 per trade but allowed me to get a ECN rebate of $.0027 using their TRAC ecn. I had special clearance to trade above their limit of 20,000 per trade. A 50,000 share Trade using TRAC ECN providing liquidity after the basic commission was:


Commission $12.50 - ECN Rebate Liquidity Net Comm.


Buy 50,000(50,000*.0027) CPST $12.50 use TRAC -$126.00

Buy 50,000 using ARCA .002 Rebate

Buy 50,000 using INCA or Island .0023 Rebate


Using a Reserve Book, often I would make $252.00 off ECN rebates when TracTrade was generous in the days of the past. They never charged for a order cancel, when did this begin?

 

[gaj]

slightly off for your specific question...

but on options, some (all?) exchanges charge cancellation fees to non-market makers.

 

[1245]

Quote from gaj:

slightly off for your specific question...

but on options, some (all?) exchanges charge cancellation fees to non-market makers.

Not accurate. Some exchanges charge NO cancellation fees to any customers like PHLX (There is one exception on the PHLX but I can't remember what it is). Also the fee is charged to the broker executing the orders if they "earn" the fee over their total volume of orders vs cancellations. So it's based on the order router/route, not your clearance firm or your trades.

Each exchange is different, but in general if the executing broker enters more then a certain ratio of orders to cancellation, they get charged. For most brokers with clients coded as customer, they don't go over the ratio in a material way so they eat the charge when there is one. High volume clients entering more then 390 orders per day on average over a month, get moved in the 'professional customer" coding, pay higher fees at some exchanges, lose customer priority, but don't get charge cancellation fees ever. This is normally for traders using an automated strategy.

1245

 

[1245]

Quote from JesseJamesFinn:

Hi!


I am a old horse that needs to protest against his current brokers for not being cool. I move my money and soon after being in the penalty box for a month of two, they will offer something nice to get me back!

I am looking at some new ideas and came across the list that some brokers (was it LightSpeed or SpeedTrader) that charge you a price to cancel a order sent out through INET and ARCA. Is this correct?


My brokers are not the cutting edge like the majority of traders here have but I can't understand how canceling a order in a stock I am thinking that I can get a better price for, is a valid transaction. Many of you change your orders quicker than me and don't get this type of profit castration! Is this something new or have I been married too long to my brokers of "Power Etrade", Fidelity Active Trader" and a few other cheap brokers I use for continuity sakes, I got a email from "LightSpeed" saying "our platform is up and running again, trading is available"



Tell me I am reading this wrong, I dumped Trade Station because of the cost of their trades was super high when you trade a block of 10,000 to 100,000 of stocks between $.01 to $2.99 per share. Options House and ScotTrade are screwballs for Sub $2 buck stocks. How does a Broker justify a "cancellation fee"?


I am looking for another Direct Access Broker who will provide Rebates for ECNs (providing liquidity) without charging me $60 bucks a trade for a block of shares even after the Rebate. I had a broker once "MyTrack" who charged me $12.50 per trade but allowed me to get a ECN rebate of $.0027 using their TRAC ecn. I had special clearance to trade above their limit of 20,000 per trade. A 50,000 share Trade using TRAC ECN providing liquidity after the basic commission was:


Commission $12.50 - ECN Rebate Liquidity Net Comm.


Buy 50,000(50,000*.0027) CPST $12.50 use TRAC -$126.00

Buy 50,000 using ARCA .002 Rebate

Buy 50,000 using INCA or Island .0023 Rebate


Using a Reserve Book, often I would make $252.00 off ECN rebates when TracTrade was generous in the days of the past. They never charged for a order cancel, when did this begin?

Your situation is unusual. Most traders that buy or sell 50K shares of a stock work into there position and are better off paying a per share rate. If you are always buying blocks, you are assuming the flat rate charge will get you a better net price because you only see the commission. I'd rather have the option to pay per share and enter an order like a VWAP order and buy large blocks over the course of a time period. Also, when you get a ticket charge or flat rate like you are discussing, it always go to a dark pool first and you can have situations where you get off a small number of shares then the MM on the other side moves the stock making you pay a higher price for your shares.

Commissions are only one side of the net price you are paying. Also, NO broker will offer you ticket charges and ECN rebates. You get the ticket charge rather then per share charge because they are receiving payment for order flow from a MM.

1245

 

[Occam]

Quote from 1245:

Also, when you get a ticket charge or flat rate like you are discussing, it always go to a dark pool first and you can have situations where you get off a small number of shares then the MM on the other side moves the stock making you pay a higher price for your shares.

This is usually true, but not always.

Also, NO broker will offer you ticket charges and ECN rebates. You get the ticket charge rather then per share charge because they are receiving payment for order flow from a MM.

Again, usually true, but not always; I've had commission plans that offered per-ticket trading with full ECN rebates. If you trade high volume, virtually any imaginable payment plan you can suggest will be considered by your broker, providing they feel that it's worth it to them.

Blanket cancel fees aren't really justifiable, except as a revenue generator and/or if the broker can't code it properly due to incompetence, as Nasdaq/ARCA "excessive messaging" policies are only for certain cases, which you can research yourself as they're beyond the scope of this post.

Another possible reason that some brokers charge cancel fees is to prod you to use their "smart" order routing system so they can direct your order to a non-exchange venue for the "fleecing it deserves": to either their internal trading pool/"affiliate" (so they themselves can trade against you), or to a rebate-paying (to them, not you) MM.