Hidden Costs of Trading.... This article is by Cybercorp, although my broker, MB Trading, has the same type of setup.
Snerd
CyBerCorp's Technology Addresses Hidden Costs of Online Trading
(PR Newswire 04/23 11:31:54)
AUSTIN, Texas, April 23 /PRNewswire/ -- The Wall Street Journal today
joined the debate, which was recently addressed by the New York Times,
Business Week and USA Today, regarding the hidden costs facing online
investors and the importance of direct electronic access to the markets and
ECNs.
Philip Berber, CEO of CyBerCorp, believes that "online brokers are
currently getting paid twice and the online investor is paying three times.
The broker is receiving commissions from their customers and then getting paid
again by a market maker for that same order. The investor is paying a
commission for the trade, and in addition is often paying the spread as well
as the slippage, which is the most expensive part of the transaction."
Slippage refers to the difference between the best price available in the
market when the online investor places the order and the price that the
investor was actually filled at. "Unfortunately, most online investors are
not offered a real time data feed and therefore don't even know what the best
bid and ask price available in that moment is," said Berber. An order
executed just 1/8th away from the best price on 500 shares could cost the
online customer an extra $62.50 for that transaction. "That additional cost,
which can be multiples of the actual commission, is hidden from the customer,"
said Berber.
The spread is the difference between the best bid and offer available and
is controlled by the market makers. "The advantage of using an ECN is that
there are no market makers in the middle of the transaction making a market
and creating a spread," said Berber. As a result, buy and sell orders are
matched within an ECN without having to pay the spread.
The solution, as suggested by the Wall Street Journal, may not lie with
the regulators. "The current business model and technology offered by these
first generation online brokers can not solve these problems," said Berber.
He believes that "it is inevitable that the next generation of electronic
execution technology over the Internet will offer real time data, direct and
intelligent electronic access to the markets, faster executions and immediate
order confirmations. The benefit to the online investor is faster executions
and lower transaction costs."
CyBerCorp has spent the past three years developing and delivering high
end, high-speed direct electronic access technology. CyBerTrader, CyBerCorp's
platform for day traders, is an "integrated trading environment" which is used
in over half of the major day trading rooms in the US and over the Internet by
way of CyBerCorp's wholly owned online brokerage subsidiary, CyBerBroker.
The CyBerCorp technology is designed to allow traders through their broker
to either direct orders to Market Makers, ECNs and Exchanges of their choice
or to route orders via CyBerXchange which "intelligently hunts and seeks"
among all the counter parties and directs the order to whichever Market Maker,
ECN or exchange "is offering the best price in that moment."
CyBerXchange, which has been described as a "Super ECN" by some is
"starting to be recognized as a major breakthrough, and the next generation in
direct electronic access, both by online traders and some leading
institutions," said Berber.
Whereas most online brokers direct orders to one Market Maker or to an
in-house ECN, CyBerXchange receives real-time data on every bid and ask from
every Market maker and ECN, and then routes the orders to the counterparty,
which is offering the best price for that order in that moment.
"We act in the online trader's best interest, not the Market Maker or
broker's best interest," said Berber.
For more information, please contact Holt Hackney, Communications Manager,
at 512-320-5444 or hhackney@cybercorp.com.
SOURCE CyBerCorp
-0- 04/23/99
/CONTACT: Holt Hackney, Communications Manager of CyBerCorp,
512-320-5444, or email, hhackney@cybercorp.com/
/Web site: cybercorp.com
CO: CyBerCorp; CyBerBroker
ST: Texas
IN: CPR MLM FIN
SU:
S.PN
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