It’s no secret to anyone nowadays in the equities business that commission rates have fallen dramatically from their 2008 highs, as the financial crisis and the competitive and electronic nature of trading has eroded brokers’ ability to charge more. But, back before the turn of the century, commission rates were a robust 6 or 7 cents per share and when compared to years prior, falling.
Yes, that was 6 or 7 cents. And the industry was actually worried about falling commission rates back then.
Now fast forward to today. Industry commission rates are off their post-financial crisis highs when bonds fell out of favor and equities were the trade du jour. And according to market consultancies, commissions per trade are at their lowest and the overall commission levels for the industry also remain off their highs – stagnating at current levels for the last few years.
Peter Maragos, CEO of agency broker and trading technology provider Dash Financial Technologies reminds that lower commission have served as a plus for the industry – increasing scope of the trading universe and reducing costs.
“Trading is far, far less expensive today than at any point in history, which is obviously a phenomenal development for investors,” Maragos told Traders Magazine. “Commission rate compression has also forced legacy brokers to innovate and has enabled new players to emerge, ushering in new execution and transparency tools that help the buy side not only trade more efficiently but better measure costs and ultimately improve processes as well.”
Maragos also noted that while there are no doubt things that can and should be done to continue to improve the current market structure to further reduce investor cost, it is important to occasionally look back at how far the industry has come and realize what it’s meant for the investment community as a whole.
Read the full article here.