At what point in the ordering process does a broker charge commission?

By Jared Coulson AAA
A:

When placing a market order for a security through a broker, there will be a commission accompanying the service. The fee charged can vary depending on whether the order is filled, canceled, modified or it expires.

In most situations, when an investor places a market order that goes unfilled, that investor will not be charged a fee. This is because the investor receives no benefit from the service. However, if the order is canceled or modified, the investor may find additional charges are added to the order.

For example, many of the major exchanges will charge members for orders that are canceled or modified. A member canceling an order placed on the Chicago Board Options Exchange will face a cancellation fee of $1.20 per order. The broker will often pass this cost on to clients. Limit orders that go partially filled will incur a fee, sometimes on a prorated basis.

The main thing to remember with brokerage fees is that each firm has a unique fee schedule. One brokerage may not charge a client for unfilled orders, while another may charge when an order is placed. Before placing an order, investors should know the details behind their brokers' specific fees.

For more information regarding commissions, read Paying Your Investment Advisor - Fees Or Commissions?

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