Hi All, I'm trying to get an idea of what reasonable execution and clearing costs would look like for somebody who trades 500K shares a day. At my old broker, Interactive Brokers, the cost was $3.5 per 1000 shares. My new broker ML is charging me more and somehow I feel like I'm overpaying. I would be very interested to hear what Merrill Pro typically charges for somebody trading that kind of volume and using it for both execution and clearing. Thanks for the help.
You always will pay a premium when you clear through a large investment bank. For doing 10mil shares a month, $0.0035 +passthroughs or $0.0045 all/in would be a reasonable rate at a tier-one clearing firm. You can get $0.001 + passthroughs if you go with a small self clearing firm like genesis, but that has its own costs/benefits.
If your money is with Penson and you can get .001, why pay the extra $300,000 per annum(rhetorical question)? Obviously people do it, but I can't for the life of me understand why someone would throw that much money down the drain, unless the fact that they're clearing through the big name tier-one firm is going to attract enough capital to create way more than $300,000 in revenue.
Thanks for all the input. So I am overpaying because I'm at Merrill. It is shocking that ML can get away with rates that much higher than its competition given that its technology and platforms are behind in many ways. The main reason I'm at Merrill is its ability to locate stock (as I trade a lot of illiquid hard to borrows). Also its bookkeeping (dividend, interest, and rebate accruals) makes life easier for my accountant. Can smaller firms compete with ML on these two points? Somebody mentioned that using a smaller firm has its costs and benefits. Could you please elaborate? In any case, I will try to negotiate with ML and knock my rate down some. Any advice about the best way to do this?