What Is a Standard Commission on Brokerage Accounts?
The commissions charged by stockbrokers are an important consideration for stock, bond and option investors. The commission rate charged by individual brokers is dependent on the product involved and how much the investor trades. Investors should review brokerage rates based on their own trading style and trading frequency.
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History
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Until May 1, 1975, brokerage commissions were at a set level used by all stockbrokers. On that date, the Securities and Exchange Commission deregulated the commission charged by brokers. Up until that point, a stock trade could cost hundreds of dollars in commissions. Then Charles Schwab started his namesake company by offering discount stockbroker commissions. Stock trading commissions dropped to $50, then $20, then to around $10 as stock buying and trading moved online and Internet brokerage accounts became available in the late 1990s.
Features
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The online stockbrokerage companies compete on their stock trading prices. Most brokers allow investors to trade any number of stocks for a single flat fee. In the Smart Money magazine 2010 Broker Survey, stock commissions for the 17 brokers rated ranged from zero to $14.95. The top-rated brokers, Fidelity, E-Trade and TD Ameritrade, charged $7.95, $9.99 and $9.99 respectively.
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Types
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Stockbrokerage commissions are not the only commissions you may incur through a broker. Options trading commissions are usually the standard stock commission plus an additional commission for each option contract traded. For example, Trade King, a broker that specializes in option trading, charges $4.95 plus 75 cents for each option contract. A 10-contract trade would cost $12.45. Most brokers offer no-cost trading for a select list of no-load mutual funds. Bonds are usually purchased without commissions, but the broker will mark up the price it charges a customer from the price it paid for the bond.
Considerations
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Some brokers offer different commission rates for different levels of trading. E-trade charges $7.99 stock commissions for traders who make more than 150 trades in a three-month period of time. Zecco is the broker claiming a zero stock commission rate, but investors must have at least $25,000 their account, and only the first 10 trades each month are free. Otherwise, stock commissions are $4.50 with Zecco. Also, most brokerage companies charge significantly higher commissions for telephone or broker-assisted trades. TD Ameritrade charges $44.99 for a broker-assisted stock trade.
Significance
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The largest and top-rated online stock brokers typically charge $7 to $10 for stock commissions. Investors need to look at the services a broker offers and any special features that fit into their investment objectives. For example, Fidelity offers commission-free trading on the iShares family of exchange-traded funds--ETFs, and Charles Schwab offers the same on their own ETF funds.
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References
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