I also think order routing revenue is a sideshow, and the prominence given to it is largely the result of people reading Flash Boys and assuming that HFT must be screwing retail *somehow*. Reality is probably “Providing liquidity to retail is pretty competitive, riskless, cheap”
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Crazy that folks think they’re being exploited by shadowy masters of the universe via employment of microwave beams and teams of physicists and not by the page which lists account interest rates.
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Now I'm having flashbacks to 1999, where people said exactly the same thing, except not on Twitter because it hadn't been invented yet.
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The fees at discount brokerages are, on a nominal basis, down by 50%+ since 1999. On an inflation-adjusted basis that's like 80%. That's measuring the low-cost option to what is no longer the lowest cost option.
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Competition will need to offer significant one-time incentives to get people to switch. Offering $0 vs $5.95 for consumers that do not trade that often won't move the needle a lot, especially when there is a bunch of paperwork and soft credit pull involved. 1/2
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Also, I wouldn't overestimate consumers caring much about trading fee vs. free (order routing). Look at Travelex and how many people think they are really getting $0 fee on those currency conversions. 2/2
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Many if not most people already pay $0. Lots of brokerages give you an allotment of free trades if you maintain a certain balance, and at the low end there's Robinhood.
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The only people who might not be able to avoid paying some commission are active traders who go over their allotment and need better trading tools than the likes of Robinhood offer. And for them there's IB at $1/trade.
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Yes. Funny thing is people who trade more because there's no cost wind up needing financial advisors more than ever because their emotions are out of whack
Thanks. Twitter will use this to make your timeline better. UndoUndo
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@M1_Finance is my preferred incarnation of that conclusion.Thanks. Twitter will use this to make your timeline better. UndoUndo
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