Trading Costs Across Brokers

The 'Actual Retail Price' of Equity Trades is a recent working paper, covered by Bloomberg.

According to Table VI, the average roundtrip cost for all trades, in basis points, was

Code:

7.2 TD Ameritrade
19.7 E*Trade
23.4 Fidelity
31.4 Robinhood
44.4 IBKR PRO
46.2 IBKR LITE
61.9 NBBO (Worst Possible)

I am surprised by the high reported costs for Interactive Brokers and am a bit skeptical, since many professional traders use IB, and they are sensitive to t-costs.

The authors traded their own money and kept trade sizes small to save money. Would the results be different for large trades?

Schwab was not included in the study since it is acquiring TD Ameritrade.

 

Unless a trader has similar trading goals, risk management strategies, mindset, experience and a host of other trading specific dynamics it would be veritably impossible to replicate the authors results.

A better way to make that determination is test your strategy in sim mode. If your time table is shorter then just backtest.

 

I'm not sure that they are.
From time to time I have put money with so called professional money/portfolio managers. In most cases they were paying higher commissions than retail traders. When I inquird about this they claimed they had better access to the trading desk and got better fills.

 

The authors are probably using IB's Fixed commission schedule which is significantly more expensive than the Tiered schedule that many professionals use.

 

The study looks at slippage based on trade prices, not commissions.

 

Thx, skimming through it looks to be very well written and researched.

 

Thanks for sharing. It’s rare so see those kind of comparison on large enough number of orders.

Noteworthy - average IB customer account is 220k, Robinhood 3k and TD 13k. Last time I looked at brokers official compliance reports, nearly all Robinhood customers used marketable orders and nearly none at IB. Point being - vast majority of their customers are not using market orders and theirs fill are much more complicated due to order or magnitude bigger average accounts. So how well 100$ orders gets executed is fairly irrelevant for that customer base.

Plus there is so much more to a broker. Including FX rates, interest on idle account, margin rates, borrow availability etc.

 

I doubt costs are 6Xat IB compared to TD ameritrade.

 

Fidelity came out well, I like them

 

The actual report pretty much comes back with some really surprising data. You can draw your own conclusions.