The Hidden Costs of No-Fee Trading

"free" trading is absolutely not free. And you can prove it. No need to throw around subjective ideas and pretend you are calculating something.
 
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It would have been nice if they mentioned the cost per trade. They threw around big numbers but the numbers involved in the US markets are huge.

For instance it would have been nice to know why the discrepancy in the first trades they made and if it was always the same broker who cost the most.

I deal with a zero commission broker and have been getting what I consider decent fills on market orders. Nothing to compare it to without paying commish.
 
deaddog said:
It would have been nice if they mentioned the cost per trade.
More...

"free" trades don't have a cost per trade. It's a statistical process. The biggest penalty you take with a "free" trade is missing out on dark liquidity between the spread. The SEC allows Citadel (your "order processor" that robs you and who TD sells your order to) to give you NBBO or better while they know statistically the amount of unlit bids and offers inside NBBO. Citadel makes billions on the price difference. They play other games too but as far as I can tell this very simple explanation is where they make most of their money.

There's nothing shady about dark liquidity. It's just odd lots or orders marked as hidden when sent directly to the exchange using a broker like IB that provides directed access. Most liquidity isn't lit on the order book, hence the reason Level II doesn't have much value to look at these days.
 
FreeGoldRush said:
"free" trades don't have a cost per trade. It's a statistical process. The biggest penalty you take with a "free" trade is missing out on dark liquidity between the spread. The SEC allows Citadel (your "order processor" that robs you and who TD sells your order to) to give you NBBO or better while they know statistically the amount of unlit bids and offers inside NBBO. Citadel makes billions on the price difference. They play other games too but as far as I can tell this very simple explanation is where they make most of their money.

There's nothing shady about dark liquidity. It's just odd lots or orders marked as hidden when sent directly to the exchange using a broker like IB that provides directed access. Most liquidity isn't lit on the order book, hence the reason Level II doesn't have much value to look at these days.
More...
They (the authors) made a days worth of trades and found a 167 dollars difference in account values. I assumed the difference came from bid ask spreads or where market orders were filled. They didn't say. Thats the cost per trade I was referring to.
 
Snake oil sellers like to promote no-fee trading.

But there is some genuine no-fee / reduced-cost trading.
At times, the Exchanges / brokers reduce the cost of trading to
- promote existing or new products,
- attract new customers
 
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