Direct-access trading is a technology which allows stock traders to trade directly with market makers or specialists, rather than trading through stockbrokers. [ 1 ] [ 2 ]

Direct-access trading systems use front-end trading software and high-speed computer links to stock exchanges such as NASDAQ. NYSE and the various electronic communication networks. Direct-access trading system transactions are executed in a fraction of a second and their confirmations are instantly displayed on the trader’s computer screen. This is in contrast to a typical conventional online trader who requires seconds or minutes to execute a trade.

Contents

Commissions and fees [ edit ]

Commission [ edit ]

Most direct-access firms charge commissions based on your trading volume, usually in terms of calendar months. Increased trading activity typically reduces commission for each trade. Commissions are generally on a per share basis and typically around 0.005 USD per share. Reduced commissions are considered a must for scalpers that trade significant volume on a daily basis.

Unlike traditional online brokerages. direct-access brokerages usually pass through the exchange fees involved in trading to customers. Examples are specialist fees, Electronic Communications Networks fees, exchange modify and cancel fees, clearing fees, regulatory fees etc. In order to improve the transparency of fee administration, some firms set pre-established fee schedules rather than passing on exchange fees directly on a per case basis.

Platform or software fee [ edit ]

Some firms do not charge their clients a platform fee. Instead, they provide a lower-end, less-featured electronic trading platform to minimize their costs. More complex systems are offered as an upgrade option, but come with monthly fees. Costs can be recovered elsewhere, including hidden fees, or giving a client significantly less interest for cash balances.

Some firms have platform or software fees which cover firms’ costs of developing, using and maintaining their proprietary trading software or platforms. The charge can be somewhere between $50 to $300 per calendar month. However, most firms will waive the fee if you trade up to a specific volume per calendar month.

Account minimums [ edit ]

There are usually two types of minimums to open a direct-access account:

Balance minimums This could be several thousands in USD. Different types of accounts may have different requirements. More deposits are required if one engages in pattern day trading according to United States regulations. Activity minimums Some firms charge inactivity fees if a minimum monthly trading volume has not been met. Many firms will deduct transaction fees and commission paid each month from that month’s inactivity fee. Hence an activity fee often serves as a minimum monthly commission which is paid to the brokerage. However, not all direct-access trading brokerages charge an inactivity fee.

Direct-access brokerages vs. online retail brokerages [ edit ]