According to NASDAQ, as of 2018, the U.S. stock market was $34 trillion – 43 percent of the world market value. With the ease of using online trading platforms, both market size and participation are increasing. But investors should take care to choose brokers who are fully regulated.
Choosing the Right Stock Broker
The U.S. Securities and Exchange Commission (SEC) is the government agency that regulates the securities industry in the United States. Under the SEC are the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC).
Investors should make sure their broker is a member of FINRA or another independent self-regulatory organization like it. FINRA regulates brokers, licenses firms and individuals, and can fine or otherwise discipline its members. In case the broker fails or goes bankrupt, the SIPC is an insurance program that protects customer assets to up to $500,000 (of which up to $250,000 can be cash).
These are some of the regulated top brokers in the United States (presented in no particular order) based on investment offerings, international access, fees and commissions, speed and security, support service, educational and other resources, and ease of use.
- TD Ameritrade: TD Ameritrade (NYSE: AMTD) is among the top ranking stockbrokers in the United States. It is well known for quality and value. This is part of the reason it has a huge account base despite having trading charges on the higher side (a flat rate of $6.95 per trade). TD Ameritrade provides a 24/7 customer support system, user-friendly website, mobile offering, rich research, and advanced trading tools. Its trading and investing platform hosts more than 11 million accounts with total assets of $37.520 billion. TD Ameritrade acquired Scottrade, which operated a network of 500 local branches in 2017.
- Fidelity Investments: Fidelity Investment's competitive brokerage rates, in-depth research, investor education resource, and good customer service make it a choice of many. The firm also provides the lowest margin rates as compared to peers. Fidelity manages over 26 million accounts with assets amounting to around $2.5 trillion (as of March 2018). Fidelity is a preferred platform for international investing as it provides its clients access to stock exchanges in 25 different countries through their primary accounts.
- Charles Schwab: Charles Schwab (NYSE: SCHW) founded in 1971 is an iconic brand that lives up to its reputation in terms of its offerings and service. The firm currently handles client accounts with assets worth a whopping $243.27 trillion. It provides stock trades at a flat rate of $4.95 and is a convenient, easy to use, high-quality platform that provides research, customer service, trading, and advisory. Charles Schwab acquired OptionsXpress and Compliance 11, Inc. in 2011. It also acquired ThomasPartners in 2012.
- TradeStation Securities: The focus of the firm has been on trading technology which has kept it ahead of many others over the 30 years of its existence. The brokerage firm has a slightly complex commission structure to suit different investor needs and thus the clients should carefully understand the same before trading. TradeStation provides a sound desktop platform and mobile trading app to cater to all categories of users including active traders, professional investors, and institutions (like hedge funds).
- E*TRADE: Founded in the early 1980s, E*TRADE (NASDAQ: ETFC) is one of the top U.S. trading platforms. It brings to its clients a well-rounded offering that tends to outweigh its slightly higher cost ($9.99). E*TRADE has 30 branch offices and even offers basic banking services in addition to brokerage services. It provides a user-friendly trading experience, in-depth research, innovative products and apps, and good customer service for both fledgling and seasoned investors as well as active traders. E*TRADE has assets worth $63.365 billion. In 2016, E*TRADE acquired OptionsHouse, which was also formerly tradeMONSTER.
- Interactive Brokers: Interactive Brokers (NASDAQ: IBKR) is best known for its low commission rates and wide access to international markets. The firm’s portal provides exposure to 30 different countries, 100 market centers, a host of investment products, lowest margin rates, and a wide range of trading tools. It’s well suited for active traders, advanced investors, and institutions.
- Merrill Edge: Merrill Edge was launched in mid-2010, a year and a half after the acquisition of Merrill Lynch by Bank of America. Being an extension of the Bank of America, Merrill Lynch gets to offer its services to the existing clients of Bank of America but is not confined to them. Investors and traders other than clients of the bank are welcome to open an account with Merrill Edge that provides regular stock trades at a flat rate of $6.95. Merrill Edge offers robust research with Morningstar and Lipper as primary report providers, free trades through its Preferred Awards Program, and excellent customer service.
- Ally Invest: Ally Invest was launched in 2017 after acquiring TradeKing in 2016. It is quickly becoming a popular stockbroker online, with various offerings ranging from mutual funds and ETFs to futures and stocks. The flat rate for trades is $4.95. Customer support is available 24/7 via phone, email or chat.
The Bottom Line
Some other stockbrokers worth a look are Firstrade and Lightspeed Trading. All the broker firms mentioned have a unique selling proposition like premium client service, low commission rates, high-quality trading experience, or award-winning status. But most importantly, these brokers fulfill the regulatory criteria of the SEC and thus provide basic assurances in conduct and practices as well as insurance, should the broker go bankrupt.