Hey, I was talking to someone who trades stock for a prop firm and he said that they do a lot of intra day since they don't pay commissions. How is that possible?
Commission free may end up being more expensive if the broker is sending thier orders to a HFT. I would check this brokers 606 report to see how they are routing orders.
good explanation, but how do expect a beginner like the OP to understand your explanation? Try Googling your broker name + payment for order flow. Many brokers do not send the orders directly to the ECNs - instead they get paid by HFTs like Citadel which takes the bid-ask spread and uses non-marketable orders as insurance to use when price rolls over. The HFT can end up adding more in costs than your brokers commission - for real. Some brokers like IB, Lightspeed, TradeStation, & Fidelity provide direct market acess (DMA) which lets you choose to route directly to the ECN's you choose. This way you are taking the middleman out, reducing your costs and getting faster fills. * Fidelty's DMA does not have a route to the IEX * * These are the brokers I am aware of that have DMA, I am not implying they are the only ones - do your own DD.
Prop firms with with direct market access and direct connection to a clearing house don't pay commission fees, but exchange fees and also clearing fees per trade. Everybody pays something for something. So that dude doesn't really know what he's talking about. Unless he's paper trading. And than still he doesn't know what he's talking about. Maybe he's trading against the prop firms own market maker desk directly, and therefore keeping the fees out of the equation... and the MM pays the fees... Still he doesn't know what he's talking about EDIT. @comagnum you were just a bit quick! That's exactly what I was thinking... if it's all off exchange, no-one pays fees... That guy basically gave OP half the story... probably because he doesn't know what's going on himself
Two words .... ITS NOT For gods sake. I'm sorry, but surely anyone who posts on a website called "Elite Trader" should surely know that there is no such thing as a free lunch in the financial sector ? If you're getting something "free" from a financial services company, look harder !!! Its like those Bureaux de Change at airports at elsewhere .... they have big posters outside saying "NO COMMISSION" in big bold red letters. And yet anybody with half a brain can look up the current FX rates on the Bloomberg website and see you're being screwed on the spreads instead. The FX desk at the airport is still getting its profit , its just getting it through the spread instead of a commission.
Well it is, read @comagnum's post. If they all trade against their own market maker, or an outside designated facilitator... they keep it off-exchange and for the daytraders there are no exchange or clearing fees. In case of dealing with an outside facilitator as a market maker, the facilitator makes money on the spread. And they might offload some of the risk on-exchange and they will pay fees for that. In case of dealing with their own market maker, the MM probably wants to offload most of the trades asap, otherwise the company as a whole doesn't make money. And then the MM will pay fees. I think some prop trades get filled internally in Investment Banks. Of desk A wants to sell and desk B to buy, you'd definitely want to clear that internally.... That said though, that guy gave OP only half the story... since it now seems that the OP thinks there is a possibility to not pay any fees at all... which in the end isn't true..