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Assuming one wanted to be able to make a high volume of trades, maybe even automated trades set up by a program/algorithm, what would the logistical requirements be?

Are there brokers that offer those services for a flat monthly fee (with no commission per trade?) Or would I need to have some other kind of special arrangement other than through a standard broker?

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    I don't think this question is off-topic. It's not asking for specific product/service recommendations, only whether such a product/service is known to exist.
    – dg99
    Commented Nov 24, 2017 at 18:20

2 Answers 2

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At least in the US, there is probably not going to be a flat-rate package, because there are per share or per unit notional charges that brokers incur when interacting directly with exchanges (maker/taker fees, and others) and the central utilities (e.g. the ORF, the SEC fee, clearance fees, etc). Other markets have similarly scaled fees.

Having worked for algo trading shops, we ourselves paid per trade fees to everyone under the sun, and that doesn't seem to have changed.

You'd want to look at different brokers and see who offers reasonable rates. Picking one out of the air, IB has fairly low comms and minimum balances.

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No.

Focusing just on the physical act of trading equities, the logistical requirements are:

  1. transmit each order to the exchange and listen to each response from the exchange
  2. perform broker (dealer) operations with the exchange on each order/trade
  3. perform broker (dealer) operations with regulatory bodies on each order/trade
  4. perform clearinghouse operations on each trade

Here are the costs:

  1. While a typical broker will charge you per-trade for #1, the underlying exchange connectivity is actually a fixed cost per month. So you can do it yourself by renting internet access to one or more exchange venues. (Certain types of trading in the US require you to rent monthly access to ALL stock exchange venues.) Such access costs many thousands of dollars per month.

  2. Brokering (or dealing if you do it yourself) operations have per-trade costs levied by the exchange that simply cannot be avoided. Even the largest institutional investor still has to pay the exchange's transaction fees. The typical broker passes these costs on to you (plus a mark-up). You could avoid the mark-up by becoming a registered broker-dealer yourself. This costs thousands of dollars per year and hundreds of person-hours to remain compliant with all the regulations.

  3. In this case the SEC (or analogous regulatory agency) is the one charging the per-trade fee that simply cannot be avoided. Even the largest institutional investor still has to pay the government on each sale. The typical broker passes these costs on to you (usually without a mark-up). If you become a registered broker-dealer to avoid #2's mark-ups then you also have to do all this work as well.

  4. Clearinghouse operations are complicated but don't necessarily involve per-trade fees; that's just how most clearing houses choose to bill you. It may be possible to negotiate flat fees with a clearing house, but only if you do a massive amount of business with them. You could also start your own clearing house, but this costs millions of dollars to create and hundreds more person-hours per year. Also, some exchanges (mostly in Europe) have required clearing houses that you must use in order to trade on that exchange.

All of the above are wrapped up into the typical per-trade fees charged by your middleman of choice. It's true that they apply a massive mark-up on each trade -- even for trades that they handle internally (instead of sending to an exchange) and which therefore never incur #1 fees or #2 fees! The only alternative is to do these things yourself, and that's really expensive and complicated and (as explained above) doesn't save you from all per-trade fees.

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  • Unless you can find a broker that is willing to eat some of these costs, the only thing you can do is try to target rebates from exchanges. Many offer maker-taker models providing a rebate (instead of a fee) for posting an order that executes rather than trading against an already posted order in the order book. Some brokers are willing to pass this through, but it is difficult for it to to become zero cost or negative (generating revenue)
    – xirt
    Commented Dec 20, 2017 at 22:49

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