Understanding where you fall as a trader is critical in selecting a broker. As an active trader, you are likely comfortable paying $4, $5, $6, or even $7 per trade. You want low-cost trades, but a feature-rich platform or research is important to you too; therefore, you are willing to pay more. However, speak to a hyperactive trader, and you will find the platform design, research, and trade tools don’t matter; cost and execution talks while everything else walks.
Because of this, our ranking in this category considers both types of trader, with the most significant factors being price, speed, and execution, as these are elements both have in common.
Our No. 1 pick, Lightspeed, wins this category because the broker caters specifically to active and hyperactive traders. You won’t find the brokers’ platform built for new investors, and you can forget about research. What you will find, though, are programmable hotkeys and a slew of order types for placing every possible trade imaginable, including algorithmic orders, alongside some of the lowest margin rates in the industry. The broker offers two commission structures, flat and per share, with discounts available as you trade more volume, i.e., millions of shares.
Under both structures, also known as an “unbundled” rates, Lightspeed passes 100% of all market rebates (or charges) for adding (or taking) liquidity back to their clients. Many market exchanges will pay your broker for routing your order to them. These rebates are usually no more than a tenth of a penny or two per share, but they add up.
Using a broker like Lightspeed, routing a 1,000-share buy limit order on the NYSE will currently net you $0.0014 per share. Lightspeed base rate is $.0045 per share, so the original $4.50 trade now becomes only $3.10, thanks to a $1.40 rebate from the NYSE. This represents a savings of 31 percent. Note, however, this goes both ways, as routing a straight market order to the NYSE instead would incur a charge of $.0027 per share, thus increasing the cost of the trade.
While Lightspeed gives (or charges) this rebate to clients as in the example above, most online brokers do not offer this option. Only three brokers offer an unbundled commission structure: Interactive Brokers, Lightspeed, and TradeStation.
Order routing aside, our other top finishers in this category shine for different reasons. Fidelity was ranked first overall for Order Execution, providing clients industry-leading trader order fills. TradeStation provides three different commission structures with quality executions and an insanely powerful desktop platform rivaled only by TD Ameritrade’s thinkorswim. OptionsHouse offers competitive commissions alongside the best stand-alone platform for options trading. We recommend reading our full online broker reviews for a complete breakdown of each broker.
All in all, finding the right broker as an active trader first requires defining “active.” Next, ask yourself, “How important is low cost?” Assume that the lower your trade costs are, overall quality will falter in one or more other areas such as research, platforms, tools, or ease of use. In the world of a hyperactive trader, there is certainly no free lunch.