All stock and ETF brokers charge commissions (the fees you pay to trade) on either a ‘per trade’ or a ‘per share’ basis. When comparing brokers, per trade vs per share fees are something you will want to consider, as the right choice can make a huge difference to the overall success of your investments.
Per trade is by far the more common model, available with the majority of online discount brokers, and many investors are not even aware of pay per trade options, but depending on your trading habits this may actually be a significantly lower cost choice for you.
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The Pay Per Trade Fee Model
Pay per trade means that if you buy or sell a block of shares then you will be charge a fixed amount by the broker for doing so. This amount will be the same regardless of whether you’re a regular investor purchasing 100 shares for your retirement account, or you’re a hedge fund manager accumulating a position by buying block of 10,000 shares at a time.
The advantage of the pay per trade fees approach is that there is a maximum cap on how much you will pay, regardless of how much you buy.
The Pay Per Share Fee Model
With pay per trade your broker will charge you based on the number of shares that you buy or sell. If you are buying a few hundred shares then it will cost you far less than if you’re buying tens of thousands. There is also a minimum per trade fee that will be charged, usually equal to 100 shares. So if you’re buying literally just a handful of shares then you’ll still be charged as though you’re buying 100. The minimum per share fee is always significantly lower than per trade fees, so if you’re buying and selling extremely small blocks of shares then it will still be the more economical option.
Per Trade vs Per Share: Which Is Cheaper?
Which of these two options will be the more cost effective for you as an investor will depend on how many shares you typically buy (you need to have a reasonable idea of what this figure will be before choosing a broker). If you trade lots of shares at a time then pay per trade is the smart choice, and if you only trade a few then pay per share is the way to go.
To understand this better, let’s take a look at a few examples. Supposing that your broker has a per-share charge of $0.005 with a minimum fee of $1, and a per trade fee of $6.95, then here are the fees you would pay for trading different quantities of shares:
|Number of Shares
||Per Trade (Flat) Fee
||Per Share Fee|
If you’re still in doubt about which fee option is right for you, then here’s a simple formula to use:
- When comparing brokers, divide the per trade fee by the per share fee.
- If this number is greater than the number of shares you typically trade, then per share fees are the most cost effective choice for you.
Using our example from the table above, we can see that $6.95 ÷ $0.005 = 1,390, so if you’re trading fewer than 1,390 shares at a time, then the cheaper option for you will be the per share fee model.
Which Brokers Offer Per Share Fees?
Very few brokers offer per share fee schedules, so your choice will be somewhat limited. However, they do include two of the most established and reputable firms worldwide, so assuming that one of them meets your other brokerage requirements you should be able to find a good solution for your investment activity. Here are some suggestions (we are in no way affiliated with any of these firms):
If you’re not already aware of per share fees and you trade small blocks of shares, then they’re well worth investigating as you may reap significant benefits in terms of reduced commissions and execution costs. We list the different commission fees that brokers charge on the stock broker comparison page.
MB Trading and TradeStation are unique in offering customers the choice of either per share or per trade execution within the same account.
PlaceTrade routes and clears all stock orders through Interactive Brokers.