For several years the industry has been putting a lot of pressure on commissions and most of the brokers have been squeezed.
There are several platforms that promote themselves as a discount broker which has driven a commission price war but has left the brokerage industry and mostly the clients with what they pay for. Discount prices generally means a very limited brokerage service and no transparency about the real components of the cost of trading.
There are several documents and articles in regards to the cost of trading which could be grouped in the following
• Explicit costs – commissions, fees, and taxes.
• Market maker spread – difference between the bid and ask prices that the specialist sets for a stock; the specialist keeps the difference as compensation for providing immediacy. For less liquid stocks, the specialist has greater exposure to adverse price movements and likely will make the spread larger.
• Market impact – results when high volume trades influence the market price. Market impact can be broken into two components – a temporary one and a permanent one. The temporary component is due to the need for liquidity to fill the order. The permanent impact is due to the change in the market’s perception of the security as a result of the block trade.
• Opportunity cost – the effective cost of price movements that occur before the trade executes.
A Discount broker will show you very small commission and fees to attract your business but the reality is that the NON Explicit costs are much more higher and have bigger impact on your overall return.
A Competitive broker like Tradeview will make sure that the explicit costs are competitive and that the spread, market impact and opportunity cost are in total control and minimized with complete transparency
Tradeview provides clients with a competitive brokerage model across all explicit and hidden fees. The firm controls its own electronic trading environment with co-located servers, liquidity aggregators and STP process. At the end of the day a brokerage firm should strive to retain clients and give them all the tools and structure to be able to make a return in the market place. Nobody can guarantee a return but we can control the complete cost of trading.