Published by Blain Reinkensmeyer
On Sunday, January 11th, 2015 .
Lightspeed caters to one type of investor, the hyperactive trader, and provides the tools required to succeed.
Platform built for speed and fast executions; highly competitive commission rates; client rebates for adding liquidity.
No support for mutual funds or bonds; trade platform not suitable for the casual investor; very basic website; miscellaneous trade fees.
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 to 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 Facebook (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 2014 Broker Review for 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 2013 enhancements, still lacks quality theoretical analysis tools offered by competitors.
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.
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 under a minute. In our 2013 Broker Review, the broker received 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.
In our 2014 Broker Review, Lightspeed's email support was a bit sporadic: Our quickest responses came back in only one hour, while the longest was nearly 24 hours. Furthermore, we found that the broker's emails were often informal and lacked in consistency.
Overall, Lightspeed support reps have a tendency to answer questions quickly and to the point, which could be explained by the fact that Lightspeeds clientele is all-business all the time. With that said, the broker has room for improvement. Standardizing its templates could go a long way to improving the experience on the whole.
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. The broker also offers grey box trading in a partnership with Trade Ideas, allowing clients to create and back-test their strategies, then use Lightspeeds API to automatically trade them.
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: trading.
Blain has been involved in the markets for over 12 years, heading StockBrokers.com equity broker research and reviews. His personal blog, StockTradingToGo.com, provides to-the-point daily market recaps to over 17,000 subscribers.
All pricing data was obtained from a published web site as of 11/01/2014 and is believed to be accurate, but is not guaranteed. The StockBrokers.com staff is constantly working with its online broker representatives to obtain the latest pricing data. If you believe any data listed above is inaccurate, please contact us using the link at the top of this page. For stock trade rates, advertised pricing is for a standard order size of 500 shares of stock priced at $30 per share. For options orders, an options regulatory fee per contract may apply.