What is the real cost of your broker?

Discussion in 'Professional Trading' started by agtrader777, Jan 17, 2006.

  1. In the near term, I am planning to sell some land and opening a trading account of around $100,000. I have been a long-term spread trader for years, but have never had an account of this size and I am beginning to seriously research brokers more thoroughly to determine the actual cost.

    It seems like all brokers are trying to beat each other on rates and services, and ET members comment regularly on who has the cheapest commissions. It seems that people are forgetting some of the major issues involved in the actual cost of a broker like quality of fills, reliability and money market interest paid on unused funds. I do not plan to margin myself more than 20%, so it is likely that I could have $80,000 sitting in my account collecting interest. This is a feature that any broker needs to offer clients.

    The interest rates that are paid by the broker are another story. I checked the TradeStation website about a month ago and they were paying about 1.1% on balances over $10,000. I checked for the link before I made this post and could not find it. IB was paying a little over 3% on balances between $10,000 and $100,000. The 'opportunity cost' interest differential between these two brokers is quite substantial.

    You might think that the money market interest is not a big deal, but if you are a futures trader, the difference between 1.1% and 3% would be between $1,200 and $1,500 a year on the account I am planning to open. This leads to the question – What is the real cost of commissions?

    Here is my real question – Is TradeStation actually free? You could look at it like you are paying $1,200 to $1,500 a year for it based on the interest differential, even if you trade 10 round turns a month and they don't charge you for it. You could also view it as an extra fee of $5 to $10 more per trade.

    Here is another issue. The difference in the fills on stop orders and the amount of slippage on trades filled on the open or close for a given broker can make up for the difference between a $35 full-service broker and a $5 discount broker very quickly depending upon how bad the fills are. Can people provide comments on the fills for different brokers so I can make an informed decision?

    What happens with different brokers when an order is placed and the “Trade Interface Fails”? It happens sometimes on the Internet. Who stands the loss?

    Can someone help me get this information for other brokers so I can make the best decision on where to trade?
  2. MTE



    I couldn't agree more with you, commissions are just one side of the coin. The other side is fills, the ability to phone in orders at no extra charge, platform reliability, tech support and etc.

    So I think the key is finding the right mix between all the variables, or rather the broker that suits you.

    By the way, what sort of spreads are you trading? I assume futures spreads based on your handle.
  3. Thanks Winter,

    I was just about to mention this. I am cleared through Penson and they do about 3%. This is substantial as I am usually in cash by the end of day.

    I use a very good broker - great comm and very good service. I highly recommend them as I've been a customer for 3 years now and have been solicited by others that pale in comparison. Let me know if you want me to PM you the name. I am not affiliated with them but I do not want to advertise freely here.


  4. My primary interest is the meat and grain spreads because of the seasonality that I see.

    I am looking to become a little more involved in actually trading short term outright positions. That is why I am performing my "due diligence" on brokers! I guess the real issue is cost.

    I have seen some brokers where the interest rate paid is in the upper 3% range but they are in equities!

    Have you seen any futures brokers whose T-Bill yields are a bit higher than what I have found?
  5. Correct me if I am wrong on this:

    Since Penson offers a sweep feature and they clear both equities and futures - you simply have to find a broker that clears with Penson.

    I think you are missing the point with your above comment - the broker in such a case does not sweep into a money market fund, the clearing firm does irrelevant of whether it be futures or equities.