Biggest Changes for Traders Since 1998-2001
Commissions
Back in the 'good old days', commissions were almost exclusively charged on a per ticket basis, and rates of $20-25 per ticket were normal, plus hefty ECN fees of up to 1.5 cents per share for executing orders through INCA, REDI, ARCA, etc. ISLD fees were zero or minimal for most firms. A typical 500 share execution against Instinet (INCA) would cost $29.50 ($22 commission + $7 ECN). Note that this is equivalent to a combined cost of 6 cents per share.
These days, commissions are becoming extremely competitive, and most active traders get commissions that are charged on a per-share basis, with 0.3 to 0.7 cents per share being typical (lower for extremely active traders). ECN fees are also lower, running 0.3 cps to remove liquidity and 0.2 cps rebate if you add liquidity with your order. So, for that same 500 share order on Instinet (now INET), you would pay $2.50 in commissions and another $1.00 in ECN fees (assuming you removed liquidity with your order). So, the same trade now costs just $3.50 (i.e. 0.7 cents per share) versus $29.50 (6 cps).
=> Commissions are much, much cheaper now than in the 'old' days, making active trading for small profits (i.e. scalping) much more feasible.
This has been extremely helpful in my trading. Back in 1999, I probably averaged 25-35 executed orders per day for the year. As a result of the new, cheaper commission rates, I am now consistently trading ~1500 executed orders per day, while paying roughly the same amount in annual commissions.
-Eric |
