Fidelity Cuts Commissions to $4.95

[LongHaul]

Race and others,

 

Are you familiar with payment for order flow?  I am not an expert in it but basically many brokers send the order another trader.

That is why the $8 commission seemed cheaper than IB's at times.  The payment to the other trader could be 5 bps on average all in.  So basically your broker gives someone else your order and allows them to rip you off.  It is small, but can quickly add up.  I think the practice is deceptive and disgusting.

 

IB does almost none of this to my knowledge.  It never made sense to my institutional investors would pay more cents per share when trading in volume vs tiny retail investors until I learned of this practice.

 

Great article on it. 

http://blog.alphaarchitect.com/2015/03/16/shedding-light-on-payment-for-order-flow-insights-from-emmet-peppers/#gs.o69VVO0