commission is everything for HFT and day traders

Discussion in 'Stocks' started by HFT2013, Apr 20, 2013.

  1. HFT2013


    Normally, retail brokers charge above 5 dollars per 1000 shares and prop shops charge about more than 2 dollars per 1000 shares as the commission rate.

    According to my many years of experience, these expensive commission rates can make you lose money. The more you trade, the more you lose and more stable you lose(by large number theorem in statistics). It is not an issue that you are intelligent or not. It is simply because the commission is too expensive. The best thing you can do by expensive commission is that you can lose less money but you still lose money.

    There are two ways to get low commission: register broker/dealer and become exchange members. You need a half million to do this. Secondly, work with a broker that will offer you commission rate less or equal to 0.125 dollar per 1000 shares.
  2. 1245


    If you were the retail broker, how much volume would you need to offer "0.125 dollar per 1000 shares? " I assume based on the other prices you meant $1.25/1000 shares. Even at that rate, where would the broker make money? They have fixed and variable costs too.

  3. HFT2013


    No. I really meant 0.125 per 1000 shares. No retail brokers in the US would offer this low rate. Only some high frequency trading clearing firm can offer this rate, but you need to pay a "monthly minimum commission fee" to them, which require you trade 5 million shares per day. Moreover, the minimum deposit is a lot of money which is above 250 K.
  4. HFT2013


    There are some high clearing firms providing low commission rate like 0.125 per 1000 shares. However, they need at least 250 K minimum deposit and monthly minimum commission fee. Moreover, you are responsible to pay all the third party software fee you need.
  5. 250K ?? 90% of the "elite trader" here not even have 25K account.

    For those who have 250K account, I can sure you they are NOT trade like this way, they have their own way to overcome this commission & slippage, or else they will not have the 250K account.

  6. HFT2013


    Again, unless you are not a day trader, if you trade frequently like several rounds per day, expensive commission will make you lose money. To over come the commission issue, either you want to do long term investment(so the commission is not an issue), otherwise you need find a low commission rate broker or you become exchange member yourself.
  7. Yes, very true. Commissions makes active trading a negative sum game
  8. at 5 million thats about 600 a day in commish, not including the sec fee.

    is there enough room to cover all exchange fees ???
  9. I disagree with your premise - if your costs are high, you trade less and only when you have enough edge. The commissions aren't a surprise - if you dont have enough profit margin after all costs, leave the trade to someone else.

    In the 3rd tier at IB, 15 mils/share means I trade for free on most exchanges after the liquidity rebates as long as I'm patient. Sure it'd be nice to pay only a few mils instead and get the higher exchange tiers or market maker level rebates for aggregated volume too, but you need to join a major broker dealer for that.

    Besides, retail commissions are even better than HFT ones sometimes. Taking 10,000 shares of SPY for $5-10 is a bargain.
  10. HFT2013


    If you use IB's SMART routing, your commission might be lower than rebate, but you'd better do some statistics comparing the execution prices with last prices. You will find you lose money.

    If you use direct routing, IB's commission will be higher than your rebate. You will find you lose money.

    IB does offer HFT traders 0.001 per share commission for institutional traders. It is still too expensive for HFT traders, that is half of the rebate which is too much.
    #10     Apr 22, 2013