What are 'Round Trip Transaction Costs'

Round trip transaction costs refer to all the costs incurred in a securities or other financial transaction. Round trip transaction costs include commissions, exchange and other fees, bid/ask spreads, market impact costs and occasionally taxes. Since such transaction costs can erode a substantial portion of trading profits, traders and investors strive to keep them as low as possible. Also known as 'round turn transaction costs.'

Breaking Down 'Round Trip Transaction Costs'

The impact of round trip transaction costs depends on the asset involved in the transaction. Transaction costs in real estate investment, for instance, can be significantly higher as a percentage of the asset compared to securities transactions. This is because real estate transaction costs include registration fees, legal expenses and transfer taxes, in addition to listing fees and agent's commission.

Round trip transaction costs have declined significantly over the past two decades due to the abolition of fixed brokerage commissions and the proliferation of discount brokerages. As a result, transaction costs are no longer the deterrent to active investing that they were in the past.

The concept of 'round trip transaction costs' is similar to 'all-in cost,' which is every cost involved in a financial transaction. The term 'all-in costs' is used to explain the total fees and interest included in a financial transaction, such as a loan or CD purchase, or in a securities trade.

Round Trip Transaction Costs and Profitability

When an investor buys or sells a security, they may enlist a financial adviser or broker to do so. That adviser or broker most likely will charge a fee for their services. In some cases, an adviser will enlist a broker to execute the transaction, which means the adviser as well as the broker will be able to charge a fee for their services in the purchase. Investors will have to factor in the cumulative costs to determine whether an investment was profitable or caused a loss.

Round Trip Transaction Costs Example

Shares of Main Street Public House Corp. have a bid price of $20 and an ask price of $20.10. There is a $10 brokerage commission. If you bought 100 shares, then quickly sell all of them at the bid and ask prices above, what would the round-trip transaction costs be?

Purchase: ($20.10 per share x 100 shares) + $10 brokerage commission = $2,020

Sale: ($20 per share x 100 shares) - $10 brokerage commission = $1,990

The round-trip transaction cost is: $2,020 - $1,990 = $30



  1. Transaction Costs

    Transactions costs are the price paid to trade a security, such ...
  2. Cash and Carry Transaction

    A cash and carry transaction is a type of transaction in the ...
  3. Inverse Transaction

    A transaction that can cancel out a forward contract that has ...
  4. Opening Transaction

    The act of initiating a trade. An opening transaction is the ...
  5. Free Right Of Exchange

    An investor's right to transfer an asset to another party without ...
  6. Flat Dollar

    A fixed dollar amount charged for transactions, as opposed to ...
Related Articles
  1. Tech

    How Much Cheaper are Bitcoin Fees than Credit Card Fees?

    Bitcoin transaction fees are starting to rise as the network gets backlogged due to more usage, but are still much lower than typical credit card fees.
  2. Investing

    Nordea Sells 15,638 TripAdvisor Shares (TRIP, C)

    Nordea Investment Management owned 153,518 shares of travel website company TripAdvisor Inc. at the end of the third quarter of 2016.
  3. Investing

    Coronation Cuts Stake in TripAdvisor Shares (TRIP)

    South African fund management provider Coronation Fund Managers recently sold 16,575 shares of travel website company TripAdvisor Inc.
  4. Investing

    CFM Sells TripAdvisor Shares in 3Q16 (TRIP)

    Hedge fund management provider Capital Fund Management recently reduced its stake in shares of travel website company TripAdvisor Inc.
  5. Investing

    Citigroup Begins Coverage of TripAdvisor (C, TRIP)

    American multinational investment banking provider Citigroup Inc. has issued a Neutral recommendation for shares of travel website company TripAdvisor Inc.
  6. Trading

    Principal trading and agency trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on to find out.
  7. Tech

    Bitcoin Transactions Vs. Credit Card Transactions

    We provide an overview of the differences between bitcoin and credit card transactions, and the advantages of using one over the other.
  8. Investing

    TripAdvisor Adds Subscription Products (TRIP)

    Travel website company TripAdvisor Inc. today unveiled subscription products to help its accommodations and restaurant partners engage customers.
  9. Investing

    TripAdvisor's Revenue Increases in 3Q16 (TRIP)

    TripAdvisor Inc. (TRIP) increased its total revenue in the third quarter of 2016.
  10. Investing

    How Does Credit Suisse Rate TripAdvisor? (TRIP)

    Swiss multinational financial holdings company Credit Suisse has provided shares of travel website provider TripAdvisor Inc. with a Neutral grade.
Hot Definitions
  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  2. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  3. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  4. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  5. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
Trading Center