Time is Money
How can other online brokerages offer such low commissions? Easy. Usually they receive a rebate for each trade or share sent to the market-making firm under a practice called payment-for-order flow. These rebates help subsidize the rock-bottom commissions charged by the online brokers. This arrangement raises some questions about whether online brokerages are always seeking out the best price for their customers' orders.
Execution delays could also be encountered by sending your order to another firm for execution. It takes time for the order to go to your online broker's servers, then onto the market-making firm for excecution. For example, you submit a market order to sell 1000 ABCD with your $10.00 online broker. You know that ABCD can move very fast and getting a timely execution is a priority. If it only moves $.25 from the time you submitted your order, you are lucky. Even at $.25 you are talking about a $250.00 difference. Sure enough, the stock moved against you $.25 before your order was filled. Now, how much did you actually save going with the lower commission online broker? The key is to have direct access to the markets and that is where TradePro comes in. |
