My 2 cents on "free" vs a service like Lightspeed.
The free offerings are mostly sending your order to an equity market maker. You typically lose the flexibility to enter certain order types like midpoint peg, hide part of my order, dark pools, VWAP/TWAP, pre, and post-market access etc. You ought to consider the market impact of your order sent to any market maker. Yes, you must consider that for any route, but why would they pay for these orders if they can’t make money on them. Sometimes they get to sell on the offer and buy on the bid. Sometimes they send your order to an ECN where they keep the rebate. I have no idea. I get many calls from prospective clients with online brokers with their free offering asking me if Lightspeed routes are faster because their orders are getting throttled. I have no metrics to share, but we are told we are much faster. Executions seem instantaneous when marketable. I place a lot of value on having the choice of where I send my order and how I want it placed, based on market conditions and the trading volume/market cap/volatility of that symbol. Speed of execution, choice of route, that is part of where our value is. Then there is the service and support of our trade desk and sales staff. That has value too. Free is never free. In fact, with all the talk of free equity trades, I find it interesting that at Lightspeed with our $4.50/Trade or $0.0045/share starting rate (with volume discounts later) has always been lower than most or all other brokers. And, if you choose the per trade rate and enter orders to add liquidity on ECNs that pay, you can get paid to trade with larger orders. E.g. Buy 5000 XYZ on ARCA adding. Cost $4.50, rebate $10.00 for a net credit of $5.50 (not including reg fees). I’m very interested to see what these online brokers will do in order to make up revenues. We have not even talked about our option rates where we have always been on the less expensive side and continue to be lower than most. Low rates are not new to us. Good software is not new to us. Good service and trade support is not new to us.
