Lightspeed Review

Lightspeed Review

For first-time visitors to the Lightspeed website, feeling confused is a common occurrence unless you can speak the lingo of Lightspeed's target market, the active trader. The homepage is littered with lingo first-time investors rarely see, let alone speak: direct market access, high-speed execution and hyperactive, to name a few.

Lightspeed is one of the few online brokers whose goal is to avoid newer investors and those with little experience. The definition of "active trader" has a different meaning at Lightspeed compared to other big names like TD Ameritrade, Etrade, Scottrade and Charles Schwab. At Lightspeed, clients trading thousands of round trips per month is not uncommon.

For investors seeking retirement calculators, third-party reports or stock education, Lightspeed has little to offer. For those wanting top-tier executions, low prices and speed, however, then welcome to your new paradise.

Commissions & Fees

Starting off with the top selling point for Lightspeed, its pricing structure, there is a lot to take in. The first decision clients must make is whether or not they want direct market access (DMA) or not. Opting for DMA is the broker's primary offering, granting clients access to their main platform, Lightspeed Trader. The alternative, flat-fee trading through Lightspeed WebTrader, is designed to be a straight-forward, simple solution for those seeking place trades with little flexibility and hand-holding.

In this review, the focus is on the direct market access "per share" structure, as it is built to cater to active traders. Equities trades run just $.0045 per share, plus/minus routing fees, which are updated nightly and posted on the website ($1 minimum). For traders who place larger orders, a $4.50 flat-fee option is also available. Option traders pay $.60 per contract.

One of the important notes about Lightspeed, shared by only a select number of brokers, is that Lightspeed does not receive payment for order flow. Instead, they kick back all market rebates (and charges) to the client, giving seasoned traders the ability to keep costs extremely low.

By adding liquidity through using limit orders, clients receive the full market rebate, which typically averages around $.002 per share. So, take for example a 2,000 share buy limit order of FB stock routed to the NASDAQ. The upfront commission charged by Lightspeed would be $4.50 for a flat-fee trade, then the trader would receive a $4 rebate from the NASDAQ (2,000 shares x $.002), bringing the total cost of the trade down to just $.50.

While the majority of online brokers keep these rebates for themselves, known as receiving payment for order flow, Lightspeed gives it back. It's because of this focus on pricing first and profits second that Lightspeed placed No. 2 overall in our 2013 Broker Review for Commissions & Fees.

	Lightspeed Trading	Interactive Brokers	TradeStation	MB Trading	Cobra Trading
Stock Trades	$2.25	N/A	$9.99	$4.95	$5.00
Options Base	$0.00	$0.00	$0.00	$0.00	$5.00
Per Contract	$0.60	$0.70	$1.00	$0.95	$0.95
Commissions, Fees

Platforms & Tools

Lightspeed's flagship platform, Lightspeed Trader, is a desktop-based platform that is designed solely for speed, stability and execution. While not the prettiest of platforms (it certainly would place last in any beauty pageant), the platform serves its purpose.

The learning curve is not too rough, however, ample trading experience is required to take advantage of all the order routing capabilities. Hotkeys are customizable down to order size, type and routing instructions. Even the data is directly fed into the platform, showing that truly every millisecond matters to the broker and its clients.

Beyond placing lightning fast trades, however, the platform has little to offer. I found the charting to be just okay, and the tools were certainly lacking. Users of TD Ameritrade's thinkorswim platform or TradeStation will feel as if they are back in the Stone Age.

Furthermore, there is no absolutely no research offered, and the options trading functionality, while dramatically improved with the most recent Q4 2012 enhancements, still feels minimal compared to other competitor offerings.

Lightspeed also offers a web version for basic trading, however, it is designed to simply place trades and nothing else.

Overall, Lightspeed's platform is designed for professional investors to efficiently trade and do their jobs without any delays. In the world of hyperactive trading, every penny and second matters, and not having perfect fills each time is unacceptable.

Customer Service

Lightspeed offers both phone and email support. The online broker used to offer current and potential clients access to live chat support, however, the service was shut down in mid-2012.

When it comes to Lightspeed's phone support, the broker consistently delivers with speedy connection times. During our testing, every call was answered by a rep in well under a minute. Testing was conducted using one of our eight different customer service templates.

The broker did get one perfect test score, impressing us by handling our "wealthy client" template to perfection. Another time, a customer service rep answered our initial questions with ease, then transferred us to a sales specialist to answer our platform questions. Unfortunately, that's where the positive experience went flat, as the sales rep was quick with answers and hardly made us feel welcomed. 

Lightspeed's email support was a bit sporadic: Our quickest responses came back in a little more two hours, while the longest was nearly 24 hours. Time aside, though, email replies were all positive and well written. Lightspeed support reps have a tendency to answer questions quickly and to the point, but they do so with a good template and professional manner.

All in all, we found Lightspeed's email support to be stronger than its phone support. 

Other Notes

Lightspeed does not offer any mobile trading support, nor does it offer any research beyond some basic technical analysis insight. Mutual funds are not supported for trading, and the broker's educational offering is very weak, which one might expect from a broker dedicated to professional traders.

Although Lightspeed lacks in more mainstream "retail" investor offerings, it thrives in its offering for complex trading. The broker's institutional arm offers algorithmic (algo) trading through its Lightspeed Trader API and black box developer kits, both often used only by hedge funds.

Closing Notes

Lightspeed is not an online broker built with new investors in mind. Instead, it caters to the hyperactive trader, professional investors and institutional investors alike, all looking for quality executions, heavily discounted commissions and a dependable platform built to serve one purpose: trade.