This is not investment advice. The information provided is for educational and informational purposes only and does not constitute a recommendation to buy or sell any financial product.
Commission fees are not the same across stock trading platforms, and the commission can vary from €0 at a discount broker to €50 per trade at a full-service broker. The commission is just one part of the total cost, and the total cost includes the spread, the platform fee, the inactivity fee, and the currency conversion fee. The trader who understands the differences can avoid the brokers with the highest commission, and the trader who compares the total cost can find the broker that offers the best value.
What drives the commission differences
The first driver is the business model. A discount broker relies on volume and tight spreads, and the discount broker offers commission-free or low-commission trading. A full-service broker relies on the commission and the asset-based fee, and the full-service broker charges a higher commission for the bundled service. The business model determines the commission level, and the trader should match the broker to the trading style.
The second driver is the product. Stocks trade at a lower commission than options or futures, and the commission is the broker's compensation for executing the trade. Options have a per-contract commission in addition to the base commission, and futures have a per-contract commission plus the exchange fee. The trader who trades multiple products should compare the commission for each product.
The third driver is the volume. Some brokers offer a tiered commission based on the monthly volume, and the commission decreases as the volume increases. The tiered commission rewards the active traders, and the tiered commission is an incentive to consolidate the trading at one broker.
The fourth driver is the account type. Some brokers offer a lower commission for a premium account, and the lower commission is an incentive to deposit a larger amount. The premium account may have a minimum balance, and the trader should weigh the lower commission against the minimum balance.
The typical commission ranges
For a discount broker, the trader pays €0-€10 per trade in commission, and the commission is per execution. The discount broker may charge a small fee for the options or for the futures, and the discount broker may charge a currency conversion fee for non-base-currency trades.
For a full-service broker, the trader pays €20-€50 per trade in commission, and the commission is per execution. The full-service broker may charge an additional fee for the research or for the advice, and the full-service broker may charge a percentage of the assets under management.
For a market maker, the trader pays €0 in commission, and the market maker earns the spread. The spread is the difference between the bid and the ask, and the spread is the broker's compensation for executing the trade. The spread is wider on illiquid stocks, and the spread is the hidden cost of trading with a market maker.
How to compare the commission
The first step is to identify the products the trader wants to trade. The trader should list the products, and the trader should compare the commission for each product. The trader should also consider the volume, because the volume affects the tiered commission.
The second step is to calculate the total cost per trade. The total cost includes the commission, the spread, the platform fee, the inactivity fee, and the currency conversion fee. The trader should divide the total cost by the number of trades to get the cost per trade, and the trader should compare the cost per trade across three to five brokers.
The third step is to look for hidden fees. Some brokers charge a fee for the data, and some brokers charge a fee for the API. The trader should read the fee schedule carefully, and the trader should ask the broker about any fee that is not in the schedule.
Common questions about commission fees
Are commission-free brokers really free? No. The broker earns revenue from the spread, the payment for order flow, or the currency conversion fee. The trader pays the broker indirectly, and the trader should look at the total cost, not just the commission.
Can I negotiate the commission? Yes, at some brokers. The trader who has a large account or a high trading volume can negotiate the commission and the platform fee. The trader should ask the broker for a discount, and the trader should compare the discount with the fees at other brokers.
What is the typical commission for options? The typical commission is €0.50-€1.00 per contract, plus the base commission per trade. The per-contract commission is the broker's compensation for executing the options trade, and the per-contract commission is in addition to the base commission.
Related resources
Where to start
If you are comparing commission fees, the most useful first step is to calculate the total cost per trade for a representative trading pattern, and to compare the total cost across three to five brokers. Our broker comparison lists the brokers and the commission schedules, which together tell you what the broker charges before you open the account.