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Ally bank claims to have zero-comission transaction fees accounts for trading, Robinhood does the same. Do they both actually not charge any fees/comission? My understanding was that the free fees model was only Robinhood's?

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    After Schwab announced $0 commission a couple weeks ago a number of other brokers joined the race to the bottom. You still pay some exchange fee of some number of pennies per trade. At this point I'm not sure why anyone would use Robinhood. – quid Oct 23 '19 at 21:04
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    This round of commission cutting was set off by Interactive Brokers – Bob Baerker Oct 23 '19 at 21:29
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    @quid I've said this before and I'll say it again - to compete, Robinhood needs to step up and pay people to trade (by kicking back some of the order flow payment to their customers) – Michael Oct 23 '19 at 22:57
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    @Michael - The routing fees in question are sub penny. One of their 4 largest routing recipients was Citadel and they paid RH about 25 basis points per share last year (less than 25 cents per round lot). So if RH shares some of that with you, you're not going to see much of a kickback. With major discount brokers eliminating commissions, I don't see how RH's stripped down platform and inferior services can compete, kickback or not. – Bob Baerker Oct 24 '19 at 21:50
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Interactive Brokers introduced IBKR LITE (no commissions) which was then followed by Schwab, Ameritrade, E*Trade and then Ally.

Be aware that free doesn't always mean best price. Robinhood makes a sizable portion of their revenue from Payment For Order Flow which is effectively routing customer orders to high-frequency traders in exchange for a fee. This can result in a delayed fill and a poorer price. Paying a few extra dollars here or there for a trade is probably meaningless to an investor but it's significant for a trader.

  • yes paying few dollars for trade is meaningless for investor, but then how to find best broker, When i look at marketing of Fidelity they claim, better money market and faster execution. Vanguard has better sweep account, but to sell naked put, one has to make phone call( very time consuming) – Raj Oct 24 '19 at 13:55
  • Fidelity and Vanguard are not brokers of choice for options. Vanguard discourages trading, in particular by raising the commission as you place more trades, well, at least from the last time I looked at their commission schedule. I don't know if that has changed with the recent wave of commission elimination. For options, in no particular order, take a look at tastyworks, ThinkOrSwim and Interactive Brokers. – Bob Baerker Oct 24 '19 at 14:09
  • @Bob I was under the impression that if they fill your order off-exchange they are required to match or beat the current exchange bid (for sells) or ask (for buys), which means you don't get a poorer price. Am I wrong? – JB Chouinard Oct 24 '19 at 20:07
  • @JB Chouinard - There's limited information available about the inner workings of Payment For Order Flow. Everything that I've read indicates that there are issues with it and the general consensus is that yes, they have to give you NBBO but if you are routed to an exchange with limited liquidity, NBBO may change by the time your order gets rerouted elsewhere. In addition, PFOF routers like Robinhood are not likely to be sharing maker/taker fees. That's no big deal for an investor but definitely is for a trader. – Bob Baerker Oct 24 '19 at 20:19
  • @Bob Interesting, thanks. It also occurred to me after making he comment, that, obviously, the exchange doesn't necessarily give you best execution, so beating the exchange is not a guarantee of getting the best price. The counterfactual to PFOF is probably a different market maker who beats the exchange by a wider margin, not the exchange itself. – JB Chouinard Oct 24 '19 at 20:37

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