Very frequent traders who want streaming real-time data look for low-cost providers who also supply them with the analytical tools they need. If free is low enough, check out TradeZero, which charges no commission for market orders of listed stocks, and for limit orders that meet their specific conditions. You can also trade options for free. Short sellers will appreciate TradeZero's patented Stock Locator service, just launched this week, which helps them find shares of hard-to-borrow stocks.
Could this be a Robinhood killer? TradeZero offers the serious active trader a lot more for the same price, though there are some restrictions.
How TradeZero Works
You can trade stock for free if the symbol is listed on the NYSE, AMEX or NASDAQ, and is priced at $1 or higher. There is a fee of $0.002 per share for OTCBB stocks, Pink sheets, and stocks under $1 per share, as well as for all trades placed in the pre-market period of 4:00 AM EST to 7:00 AM EST. Margin interest is the Federal funds rate plus 3%.
You still pay SEC and FINRA fees on your trades. Options trades are commission-free, but you pay exchange fees. There are no inactivity fees, but you'll pay $5 for an outgoing ACH transfer to your bank account.
TradeZero has three software platforms available, plus a mobile app that any customer can use for free. Their top-of-the-line downloadable Windows-based platform, ZeroPro, costs $59 per month and includes Level 2 quotes, charting, real-time news, a stock screener, and customizable layouts. You can trade options using ZeroPro at no additional cost.
Most of ZeroPro's functionality is built into the firm's web-based platform, ZeroWeb, except for options trading. ZeroWeb is also $59 per month. The ZeroFree platform is free, as the name implies, but you have to pay an add-on fee of $25 per month each for Level 2 quotes and options trading. Clients with more than $50,000 in their accounts get ZeroPro for free as well as lower margin interest rates.
ZeroPro, according to co-founder Dan Pipitone, is designed for serious active traders. It is a customizable platform with smart order routing and allows users to define hot keys for faster order entry. There are watch lists that can be sorted based on real-time data. You can also set up conditional orders so that the trades to exit a position are entered when you make an opening transaction.
Stock Locator for Short Sellers
Pipitone says one feature that sets TradeZero apart, aside from no-commission trading, is their Stock Locator. This feature helps short sellers find hard-to-borrow stocks that can be reserved for their use should they decide to sell to open a position. Reserving stock to sell short incurs a fee, which varies depending on how much demand there is for that particular stock.
If you reserve some stock to sell short, you pay the fee, whether or not you actually place the trade. Stock Locator also lets a customer who allocated stock to sell short to put those shares back in play and recoup some of the cost of the reservation.
During Pipitone's demonstration of the platform for us, he reserved 100 shares of a stock that was taking a downturn for $2.10. When he put that lot of stock back into Stock Locator, another client picked it up and Pipitone received $0.54, lowering his cost of making the reservation to $1.56.
According to Pipitone, TradeZero customers have access to a lot of stock that is otherwise extremely hard to borrow. "We think the average trader should have the same tools that the guy at Goldman Sachs has," says Pipitone. "You should have access to shortable stocks so you can express your bearish outlook."
TradeZero has been in business in the Bahamas and allowed non-U.S. customers to avoid the pattern day trading rules that required them to have at least $25,000 in their accounts. The Brooklyn-based company is operating in the U.S. under SEC and FINRA regulations so that $25,000 is mandatory for American residents.
How Does TradeZero Make Money?
How does TradeZero make money? They have four sources of revenue, the first of which is the platform fees that most customers pay for the ZeroPro or ZeroWeb platforms, and for add-ons to the ZeroFree platform. They also receive some payment for order flow, and earn money on margin lending. TradeZero shares the interest earned on cash balances with their customers. They also generate some revenue with their Stock Locator tool.
"We offer a lot more than Robinhood," Pipitone says. "We're not targeted to someone who is just figuring out the stock market though. We are making tools for the frequent trader."