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Gene K. Frydel wrote:
>
> Fellow Traders,
>
> I stumbled upon an advertisement for a stock broker offering zero
> commissions on Nasdaq trades of at least 1000 shares.
> They're at http://www.webstreetsecurities.com
>
> My question is, how do they make money on those trades?
> Also, does one pay extra in the form of slippage, and
> has anyone had any experience with them?
>
> Thanks,
>
> Gene
Don;t know about this firm in particular, but in general OTC brokerages
get paid a "kickback" by marketmakers for orderflow. For example, if a
broker gets a market order for 1000 shares of XYZ, chances are there are
more than one marketmaker on the offer price. The broker can choose any
of them. So marketmakers pay the broker to call them. Typically 1 or 2
cents a share. Also, even more money is made if the holding company
that owns the brokerage also owns a marketmaking firm. This is the case
with NDB and Sherwood Securities. So the broker just goes through the
marketmaker and the money stays in the same "company". The market maker
might make an eigth or so on the shares and that ain't bad.
THose are just some ideas how it can be done. Also be on the lookout
for extra fees in your account that are not labeled commissions.
Good Luck,
Eric
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