Will zero commissions lead to sharper sell-offs?

[lindq]

That's my "unintended consequences" prediction for the day.

 

[ET180]

I doubt it. Think about who zero-commission really benefits...people making small trades...small accounts...small money. But maybe it adds up...not sure.

 

[Baron]

That's my "unintended consequences" prediction for the day.

That's pretty insightful actually. If the cost of exiting a position is no longer there, then surely that will increase the number of people who will be willing to bail from the threat of a sinking ship.

 

[tiddlywinks]

My auto mechanic has 25 shares of AMZN.
*IF* he uses a zero-commish broker AND *IF* he sold today,
that would be .00000625 percent of the 4 million plus shares traded so far today.

IOW, zero commish brokers have no affect.

 

[S2007S]

Disagree. Makes zero difference if a commission is paid or not.


Commissioners are not hundreds or thousands of dollars like they once were. We have had low commission trades now for 20 years. Now free. Makes no difference on the cost of a trade whether or not it would lead to a sharper selloff.

 

[OptionsOptionsOptions]

It is said or rumored that the retail trader will ride a sell-off to the bottom - so zero commissions probably won't change that.

 

[zdreg]

That's pretty insightful actually. If the cost of exiting a position is no longer there, then surely that will increase the number of people who will be willing to bail from the threat of a sinking ship.

It more likely means that the public will no longer sell at the bottom when in past history they have given up all hope. In fact since they are out of the market they will not be like the odd -lotters of the old days. They will recognize a bargain and buy. This time pension funds who cannot meet their actuarial assumptions are bailing.

 

[FriskyCat]

Disagree. Makes zero difference if a commission is paid or not.


Commissioners are not hundreds or thousands of dollars like they once were. We have had low commission trades now for 20 years. Now free. Makes no difference on the cost of a trade whether or not it would lead to a sharper selloff.

OP's comment was more insightful. Coupled with zero commissions are the fractional share offerings (tons of odd lot activity), the massive push for the young to jump in and overall illiquid price structure.

 

[LS1Z28]

That's not something I would predict. Retail investors only account for ~10% of trading volume, and I don't see institutional investors changing the way they trade due to zero commissions. A financial transaction tax could change things significantly though.

 

[zdreg]

That's not something I would predict. Retail investors only account for ~10% of trading volume, and I don't see institutional investors changing the way they trade due to zero commissions. A financial transaction tax could change things significantly though.

"could"
That gets my vote for the understatement of the year.

Here is my previous post:
e.g. 100k stock account ftt of 1/10 of 1 percent or.001. 4to1 intraday margin 4 to1
turnover 400k/day
tax cost $400/day annual cost 100k

At year end breakeven trader has lost all his capital.
https://www.elitetrader.com/et/thre...disappearing-day-traders.340600/#post-5016730