Brokerage

Recently I did some research into brokers with low margin interest rates and with low trading commissions ($3 or less per trade). Since I already had them all typed out in my notes, I thought I would post them in case someone else might find it useful. The rates are valid on or around April 28, 2009.

eOption.com (affiliated with placetrade and investrade) (see important update below)

• BC + 1.5% = 3.5% for up to $50,000
• BC + 0.75% = 2.75% for $50,000 to $99,999
• BC + 0.0% = 2.0% for $100,000 to $249,999
• BC – 0.5% = 1.5% for $250,000 to $499,999
• BC – 1.0% = 1.0% for $500,000 and above
• Interest @ 2.75% for $80k a month = $183.33, after tax = $100.83
• Interest @ 2% for $100k a month = $166.67, after tax = $91.67
• Trading fees : $3 per ticket
• ACH transfer limit = $50,000 a day

Just2trade

• BC + 0.75% = 2.75% for up to $100,000 (confirmed with them that there is a typo on their margin rates page)
• BC + 0.5% = 2.50% for $100,000 to $250,000
• Interest @2.75% for $80k a month = $183.33, after tax = $100.83
• Interest @2.50% for $100k a month = $208.33, after tax = $114.58
• Trading fees : $2.50 per ticket

Interactive Brokers

• BM + 1.5% = 1.65% for up to $100,000
• BM + 1% = 1.15% for $100,000 to $1,000,000
• BM = Feds fund rate = 0.15%
• Interest @1.65% for $80k a month = $110.00, after tax = $60.5 + $10 monthly fee
• Interest @1.15% for $100k a month = $95.83, after tax = $52.71 + $10 monthly fee
• Minimum fee $10 a month
• Trading fees : 0.005 per share, minimum $1
• 2nd withdrawal in the month : $1 by ACH, $4 by check, $10 by wire

Options House

• BC + 2.25% = 4.45% for up to $50,000
• BC + 1.45% = 3.45% for $50,000 to $499,999
• BC + 0.45% = 2.45% for over $500,000
• Interest @ 3.45% for $80k a month = $230, after tax = $126.5
• Trading fees = $2.95 per ticket

WellsTrade (Wells Fargo) (called 4/28/09 10.10am)

• WFI, Wells Fargo base rate = 4.00%
• WFI + 3% = 7% for up to $10k
• WFI + 2.75% = 6.75% for $10k to $25k
• WFI + 2.25% = 6.25% for $25k to $50k
• WFI + 1.75% = 5.75% for $50k to $100k
• WFI + 1.25% = 5.25% for $100k to $250k
• Trading fees : up to 100 free trades a year

Note: BC is the broker call rate, currently 2%. The “after tax” number reflects a 45% combined federal and state marginal income tax bracket.

Comments

The absolute lowest rates are from Interactive Brokers but they want to charge you a minimum of $10 in trade fees a month. If your trade fees do not add up to $10, they will deduct $10 anyway.

The next best rates are from eOption.com — at BC = 2% for amounts from $100k to $250k. This rate is lower than the interest rates from leading savings accounts, and is also cheaper than a HELOC loan.

I included the margin schedule at WellsTrade for comparison only because I have an account there. Their rates are not at all competitive.

I also looked at some other brokerages like Fidelity, VBS (Vanguard), TD Ameritrade, Scottrade, Firstrade, Tradeking, Etrade, Charles Schwab, Options Express, Sogotrade, MB Trading. Their rates are all higher.

Other resource(s)

[1] List from Broker Reviews.

Update 8/03/2009

eOption increased their margin rates as of 8/1/09. The new schedule is as follows (BR, base rate is 5%):

• BR = 5.0% for up to $50,000
• BR – 0.5% = 4.5% for $50,000 to $99,999
• BR – 1.0% = 4.0% for $100,000 to $249,999
• BR – 1.5% = 3.5% for $250,000 to $499,999
• BR – 2.0% = 3.0% for $500,000 to $999,999
• BR – 2.5% = 2.5% for $1,000,000 and above

After my bout of issues (Tradeking is holding my money hostage and Tradeking changes its ACH holding time to 60 business days) with Tradeking, I haven’t actively used my Tradeking account. Recently, I happen to notice that Tradeking has changed part of its fee structure.

First of all, Tradeking has significantly increased its margin interest rates. Tradeking used to have quite competitive margin interest rates but no more. The following is an email from Tradeking sent earlier this month and their current margin interest rates:

Debit Balance                   Rate
$0 – $49,999                   6.5%     (Broker Call + 4.5%)
$50,000 – $249,999        5.5%     (Broker Call + 3.5%)
$250,000 +                      4.5%     (Broker Call + 2.5%)

If I remember correctly, their old margin interest rate schedule was

Debit Balance                   Rate
Any balance                    (Broker Call + 1.0%)

For comparison, the current margin interest rates at Just2Trade.com are just

Debit Balance                   Rate
under $10,000                 2.75%     (Broker Call + 0.75%)
$10,000 – $249,999        2.50%     (Broker Call + 0.50%)
$250,000 – $499,999      2.25%     (Broker Call + 0.25%)
$500,000 +                      1.50%     (Broker Call – 0.50%)

The second change is that Tradeking has quietly added annual maintenance fees to its check writing products (there was no notification email from Tradeking about this). The base “Gold” checking product now has an annual fee of $50 while “Platinum” check writing has an annual fee of $75. Check writing used to be offered free.

I do not track the other fees. Those might be changed as well.

Thanks to reader Buddy Hall’s feedback, I now know that Wells Fargo has just added tax-lot trading to their online system.  Now, there is “no more calling into a broker after sale to identify your tax lot sold. Wells Fargo offers new web interface to specify shares from tax lots to be sold.”

The link to this annoucement is

https://invmnt.wellsfargo.com/whatsnew_wellstrade.html

Keywords : Wells Fargo PMA, Wellstrade.