FT News Briefing The true cost of zero commission trading
Jun 10, 2021
Today’s discussion reveals the hidden costs of zero commission trading, exposing how brokers benefit financially while retail investors may be left in the dark. Recent inflation data could shake up the markets, and President Biden’s stance on China is set to strengthen alliances. Concerns arise over Olympic sponsors and their brand image amid the Games. The podcast also includes insights from market insiders on regulatory scrutiny in equity markets and its effects on trading practices.
AI Snips
Chapters
Transcript
Episode notes
Hidden Costs of Zero-Commission Trading
- Zero-commission trading apps aren't truly free, as market makers pay brokers for order flow, totaling nearly $3 billion.
- This cost is indirectly borne by retail investors, making seemingly free trades more expensive than they appear.
GameStop: A Case Study in Illiquidity
- The GameStop frenzy exemplifies how zero-commission trading encourages investors to trade illiquid stocks.
- This benefits market makers and brokers who profit from wider margins on these trades.
Gerko's Critique and Potential Bias
- Alex Gerko, head of XTX Markets, a traditional brokerage, criticizes zero-commission trading.
- His firm competes with market makers, not retail brokers, suggesting a potential conflict of interest.