New York-based online broker-dealer TradeZero America now allows its ‘active traders’ to select the specific destination where their orders are routed for execution. Those who maintain a minimum account balance of $30,000 can take advantage of these features to increase both the speed and likelihood of order execution, while simultaneously lowering their trading costs by taking advantage of rebates.
The ability to choose from a variety of market routing destinations, however, requires traders to familiarize themselves with the various trading and order handling rules of the venue to which they intend to direct route their orders.
Although some orders require to pay associated transaction costs, most orders result in rebates. TradeZero America said it would not only offer this service with zero fees for eligible investors but will also pass the rebate along to the investor, potentially offsetting per share cost.
The default offering at online brokers uses the so-called ‘smart order routing’ where particular algorithms scan competing markets and liquidity providers and automatically route orders directly to the best venue, depending upon a variety of factors.
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The practice has drawn the attention of regulators as laws oblige brokers to conduct order-by-order reviews to ensure their traders are getting the best prices and trade-execution speed. Robinhood, the buzzy startup that lets its customers trade stocks for free, was fined last year after the Finra found the company had routed all trades to four securities firms that paid it for order flow.
More access to hard-to-borrow stocks
TradeZero America also said it would offer clients easier access to hard-to-borrow shares though a locate feature built into its platforms. This patent-pending feature enables TradeZero investors to sell their shares to other traders on the platform, which resolves one of the major disadvantages of shorting stocks that appear on a hard-to-borrow list. Most brokers require traders to pay high fees or enroll in special programs to have access to such stocks, given the relatively few borrowable shares coupled with the huge demand from short sellers.
TradeZero had begun as an international company, and investor demand led to the formation of its US arm, TradeZero America, which provides commission-free stock and options trading across all US states.
“Many trading platforms allow investors to designate the individual market center where buy and sell orders are routed for execution, but there is typically a commission. At TradeZero, we’re providing this service commission free for our more active traders who maintain higher balances with us,” said Dan Pipitone, TradeZero America co-founder.