'Zero Commission' Trading: What It Actually Costs

The commission line went to zero. The costs did not. "Zero commission" describes one fee on a statement, not the price of a trade. Brokers are businesses; when one revenue line is advertised away, others carry the weight — and most of them are visible only if you know where to look. This page names each mechanism and prices it.

Where the money went: payment for order flow

When you press buy, your broker decides where the order goes. For listed stocks it can route to an exchange, another exchange, or a market maker — a firm standing ready to trade at quoted prices. Some market makers pay brokers to receive customer orders, often fractions of a cent per share; this is payment for order flow (PFOF), and Investor.gov's order-execution guide describes the mechanics plainly. Brokers owe a duty of best execution — seeking the most favourable terms reasonably available, assessed across all customers in aggregate. PFOF is not automatically a worse fill, but it moves the broker's incentive, and the only honest response is to measure your own fills against the quoted price at the moment of execution.

Commission versus mark-up

The SEC's trade-confirmations bulletin draws the distinction that hides half of retail trading costs: when a broker acts as your agent, the charge is a commission; when it acts as principal — the actual opposite party of your trade — the charge is a mark-up or mark-down built into the price you paid, and it never appears as a fee line. Confirmations must also disclose, on request, the source and nature of any order-flow compensation. Read your confirmations; they are the only document that shows what a trade actually cost.

The spread is the first fee

Worked example: a "commission-free" CFD or FX trade on a pair quoted at 1.20000 / 1.20020 costs 2 pips the instant it opens. On a $10,000 notional position that is roughly $1.67 per round trip before anything else. Trade five round trips a week and the invisible line item is about $434 a year — on an account whose visible commissions are $0. The desk's spreads-and-pips page works this in full; the point here is only that zero commission plus wide spread is just a commission by another name, and often a larger one.

The quiet lines on the statement

Beyond spread and routing, the recurring charges on "free" platforms cluster into four: currency conversion (trading US stocks from a non-USD account can cost 0.5–1.5% per conversion unless the platform offers real FX), inactivity fees (charged precisely to the accounts least likely to notice), market-data subscriptions (real-time quotes on some platforms are a paid tier, and trading off delayed data is a different activity), and withdrawal fees (small, flat, and cumulative for anyone who moves money monthly). None is large alone. All are structural, recurring, and priced before you ever pick a market.

The five-minute audit

Take your last ten trades and compute the true round trip: entry price versus the quoted bid/ask at execution, explicit commissions, any conversion applied, and financing if the position held overnight. Divide the total by ten. That number — not the fee schedule's headline — is what your strategy must beat per trade. If it is larger than your average expected gain, no entry signal on any chart will save the account; the business model underneath the platform is simply charging more than the edge produces. The desk's fees page catalogues every line item; this audit is how you price them on your account, with your broker's numbers.

Sources and further reading

Links were reviewed 2026-09-25. Regulatory permissions, firm status and product terms can change; use the current official register before acting.

Zero commission: what it actually costs