Since you’re not from US, what trading platforms do you use? I haven’t found any with free commissions and public APIs in the EU. Well, except for Interactive Brokers.
You probably won't ever see an EU broker offer free trades. The EU market is more regulated to avoid anything that smells of front running. There was a somewhat revealing interview by the people behind Flatex, a big discount broker from Germany [0].
"Is it easier for a pan European company to keep big US competition like Robin Hood and Ameritrade out?
Niehage: 'The companies you name are very badly positioned for Europe. Their economic model is based on two pillars. Firstly, they want to offer everything for free. But if you offer all services for free, you have to earn money with the capital in the investors' accounts. That is possible in the US, where you can still get 2% of interest. In Europe, with zero interest rates, that's very different.'
And the second pillar of their economic model?
Niehage: 'That's the high frequency traders. As far as I know, Robin Hood sells its customer orders to this kind of parties. They are prepared to pay good money for that. According to the European MiFID II-regulation, that is illegal. Those two examples show that the US and EU markets are totally different. That's why American brokers have difficulties breaking into the EU market.' "
And then fintech startups like Trade Republic or Just Trade came along and...offered basically free trades (the 1€ at TR can be considered almost non-existent when comparing to the 5-10€ even at discount brokers like Flatex).
They found a third way of financing themselves: just support one marketplace which kicks back some money to them on each trade, which they in turn earn from the spread between buy and sell prices.
I thought the US predecessors of this kind of broker (Robin Hood comes to my mind first) which is still pretty new in Europe would have basically the same business model - earning some money with each trade by scraping off a few cents (or a good bunch of cents for stocks with low liquidity) from the spread?
> You probably won't ever see an EU broker offer free trades.
Freetrade, Trading212, both registered in the UK. (And I don't think 'transition period' would make a difference, but they're both years older than that.)
I had a quick look at Trading212 without properly investigating their business model. They seem to route all of their stock market orders through Interactive Brokers [0].
I'm in Australia, so the choices here are also a bit limited. Also, I'm less interested in equities. In the CFD space, my shortlisting technique now is basically "do you offer cTrader", because as mentioned above, this means they have a FIX endpoint.
Broker offerings here seem a few "paradigm shifts" behind the US. Zero commissions are unheard of last I checked. Also, if you approach some brokers here and ask for an API or a FIX endpoint, you're either told to go away, or you're effectively ushered into a luxurious room, poured some exquisite scotch, and asked about how many millions of AUD you're looking to trade per month. And _then_ told to go away.
> Broker offerings here seem a few "paradigm shifts"
> behind the US. Zero commissions are unheard of last
> I checked.
A US-style zero-commission model is not viable in the Australian landscape. The root of this is due to regulatory differences, rather than actions by the brokers.
A key to understanding the US system is something
called Regulation National Market System (RegNMS). Loosely, if you are filling an order for someone, it must be at a price that is at least as good as the best price available on any US market at that time. [Anecdotally, if the NYSE receives an order, and there is a better price available for the same stock on Nasdaq at the same time, NYSE can't fill it at their inferior price.]
This creates a hyper-competitive single market. At any one time, you can know the bid/ask spread for any stock, nationally. And, it's a tight spread.
Market makers compete here. But a market maker would prefer to interact with retail orders. Because what a typical retail participant cares about is getting an immediate execution at the best price currently in the market, in order to make a long-term investment.
So a market sprung up: market-makers pay brokers to send these benign orders to them directly, without going through the public market. The market maker fills these order at a price that satisfies RegNMS. [Some of them might even distinguish themselves by giving the consumer a better price than they would have got on the public market. Your broker might send you a report with your trade saying how much "price improvement" you got compared to what you would have got at the same time on the public market.]
The reason the trade is "zero commission" is because the market maker is paying your broker for the privilege of interacting with you directly, because you don't have a view on where the market is going to be in five seconds' time.
Australia has not developed anything equivalent to RegNMS. Without that, there is no foundation for the zero-commission trades (there is no national best price to protect consumers with). In Australia, the typical situation is retail orders being sent directly to the book on the ASX (a pseudo-monopoly exchange), where they are directly interacting with the most sophisticated houses.
If you google, you can find an ASIC paper trumpeting that Payment for Order Flow has been banned. In my view, the real story is a lack of innovation by Australia's regulators.
Is IB "Interative Brokers"? I'm trying to figure out if Aus is Australia or Austria. I'm in Australia, and have been looking at who to go with. Almost signed up with CBA last week, but definitely more expensive to what I'm used to in North America.
Dutch source, do use a translator https://www.tijd.be/markten-live/nieuws/algemeen/nieuwe-eige....
"Is it easier for a pan European company to keep big US competition like Robin Hood and Ameritrade out?
Niehage: 'The companies you name are very badly positioned for Europe. Their economic model is based on two pillars. Firstly, they want to offer everything for free. But if you offer all services for free, you have to earn money with the capital in the investors' accounts. That is possible in the US, where you can still get 2% of interest. In Europe, with zero interest rates, that's very different.'
And the second pillar of their economic model?
Niehage: 'That's the high frequency traders. As far as I know, Robin Hood sells its customer orders to this kind of parties. They are prepared to pay good money for that. According to the European MiFID II-regulation, that is illegal. Those two examples show that the US and EU markets are totally different. That's why American brokers have difficulties breaking into the EU market.' "