Best Brokers for Penny Stocks

Penny stocks are considered highly speculative (and high risk) investments due to their lack of liquidity, large bid-ask spreads, small capitalization and limited filing and regulatory standards. Still, some investors like to trade penny stocks because the low price makes it possible to hold thousands of shares for a relatively small amount of capital – and all those shares mean investors can profit with the gain of just a few cents per share.

Low-priced securities cannot be held in custody at the Depository Trust Company (DTC) and, may carry pass-through charges that can be as high as 10 times the value of the trade itself. Non-DTC eligible securities cannot be cleared electronically. Exchanges such as NYSE and Nasdaq require DTC-eligibility, but it’s up to you to determine the eligibility of penny stocks trading on the OTC Bulletin Board and OTC Markets Group (a current list can be found on the DTCC website).

Our criteria for putting a broker on this list include access to the OTC markets, low account minimums, flat rate per-trade commissions with no additional charge for low-cost stocks. We also look for real-time margin calculations so you're aware of your buying power.

While many brokers offer penny stocks, some add a surcharge to stocks that trade below a certain dollar level or volume restrictions that bump up the price for large orders.

Interactive Brokers' very low per-share trading commission of $.005 ($1 minimum per trade) and up-to-the-split-second real-time margin calculations are ideal for penny stock traders.

Schwab's research pages point out the exchange on which a stock trades, which will keep you informed of the inherent risk. There are a variety of platforms available; the StreetSmart platforms have customizable charting and streaming real-time quotes. Schwab has recently eliminated base trading commissions on all stocks (including penny stocks), ETFs, and options.

Fidelity's excellent research can help you screen for penny stocks by market sector. Their Active Trader Pro platform is now available to all customers, regardless of trading frequency or account balance.

The more shares you trade per month, the lower your fees at TradeStation. All data streams in real-time. You can place, modify, and cancel trades from charts or by using keyboard shortcuts. TradeStation recently released a new service, called TSgo, that allows users to trade penny stocks commission-free.

eOption's low-cost, no-frills web platform offers speedy executions but few creature comforts. You can connect to their trading engine using Sterling Trader Pro or DAS Trader if you want better charting and analysis, though that will cost $230 monthly. Some OTCBB trades must be placed with a live broker, for an additional $6/trade fee.

Regarding the other brokers we surveyed, Robinhood and tastyworks do not allow OTCBB trades. Ally Invest and SogoTrade apply surcharges to trades of stocks of under $1 per share, which can significantly add to your trading costs. Lightspeed charges a flat $10 per OTCBB transaction, which is much higher than average.

Interested in making penny stocks a part of your portfolio? Check out our guide to trading penny stocks before you jump in.