Do you think a stock broker that charges $1 commission is a good business idea?

Discussion in 'Retail Brokers' started by oooooo, Jan 11, 2011.

  1. oooooo


    so i am just thinking to create a brokerage/website where orders will cost a fixed $1 dollar. I know there are many expenses/problems, etc. I am just asking if you think customers will be attracted to such thing or they will stick to known names like etrade, scottrade, etc.

  2. joe4422


    I place trades with IB for 1 dollar sometimes. Besides the fact that it would be completely impossible for you to do it, names do mean a lot as well.

    Some people don't know that SIPC does not help you if your broker has purposefully stolen your money. They do not cover fraud cases at all. So name is important.
  3. then how come they are paying the Madoff victims?
  4. MTE


    You mean $1 irrespective of the number of shares? If so then you wouldn't last long in the business.
  5. MTE


    SIPC covers securities not cash! If you want cash protection then you need to have a segregated account, which is usually the case when you trade exchange-traded products.
  6. chartman


    All cash accounts are suppose to be segregated. You can have securities, both listed and OTC, and/or cash in a segregated account. Cash account does not mean that all assets are in cash only that margin is not being used. Unless the rules have been changed since I was involved in the business, SIPC covers up to $500,000 in an account, cash or margin, with a maximum of $100,000 being in cash. Most brokers carry private insurance for additional protection.
  7. I don't think this is correct.

    Years ago when I was a Principal, SIPC covered "missing securities and cash from customer accounts". The key word is "missing"... without regard to the reason for it being missing.
  8. oooooo


    Thanks for the input...but to say it again: I am not asking if the expenses will make it impossible to charge that little - but if people will have interest overall to join in. Zecco started by the way in a very dirty and an obvious cheat: They offered "0 commissions" on all orders when they started in 2006 and an year later we have zecco with $4.5 and some bizarre explanation that they still have offer free orders...but only on christmas...
    I am not saying that i have the same dirty plan, it's just to see how "rational" investors are :).
  9. Actually, a lot of clearing deals are per-symbol. If you limited the $1 commission to, say, the 100 most popular symbols, then it doesn't matter how many shares are executed across the firm... however, downsize is if some guy executes 100 shares in a symbol no one else trades, you still have to pay the same cost as for the 15million you executed in C. Limiting it to certain symbols would, however, avoid that problem.
  10. oooooo


    Yeah perhaps - name is everything in this industry. People will perhaps deposit money with Deutche bank if they offer some competition to zecco, etrade, scottrade even if Deutche bank charges $9 per trade which will be far above the average for the brokers imo.
    #10     Jan 11, 2011