Apparently if you start making too much money (bigger order sizes) and try to avoid paying slippage (by splitting up your orders or trading the auctions), they will arbitrarily start charging you extra fees.
I don’t understand why alpaca needs to flag certain accounts and charge them commissions, since other commission-free brokers don’t have a similar policy. If you aren’t taking advantage of users, what’s the cost of having users that can trade well on the platform? Seems that Alpaca only wants users who trade poorly and pay a lot of slippage, if you win too much they kick you out like a casino.
Aside from the forum post (and other similar posts on the web), i cant find a page mentioning this 0.4 cents fee anywhere.
What I would like to know is, do these 0.4 cents also apply to users paying the 99$/month under the “unlimited plan”( “for algo traders and quants”), or “professional plan” (“for professional traders and hedge funds”)? What about people building with the broker api? Can they also randomly start getting charged these fees for each trade? This is all unclear.
How can we trust a broker whose main advertising point is “zero fees”, targeting “algo traders and quant funds” but at the same time reserving the right to start charging random fees to any customer?
Note the text “Commission free trading is available for Alpaca’s retail customers. Alpaca reserves the right to charge additional fees if it is determined that orders flow is non-retail in nature.” There aren’t any hard rules defining ‘retail’ order flow but there are some guidelines in this FAQ. Less than .1% of all Alpaca accounts are ‘non-retail’ so this doesn’t apply to most traders.
Alpaca works with a number of execution partners who actually execute the trades. Many of those partners pay Alpaca for orders we pass to them which then allows Alpaca to offer those trades commission free. However, each execution partner has guidelines for the types of orders they accept, and each partner has slightly different guidelines which is why there aren’t hard rules for which orders are considered commission free. In any case, the determination is made on an account basis and not an order basis. One will never see a charge without first being notified, and given the option, to going with a non-retail account.
To answer the specific questions
"do these 0.4 cents also apply to users paying the 99$/month under the “unlimited plan”.
The data plan one subscribes to is completely entirely separate from trading and therefore does not impact any trading fees. Market data is a standalone product one can subscribe to but one could also subscribe to any third party data as well. There is no impact to how orders or trades are executed.
“What about people building with the broker api?” Order fees for developers using the Broker APIs are generally negotiated on an individual basis. However, 99%+ of all those orders are again commission free because they are ‘retail’ in nature.
"Can they also randomly start getting charged these fees for each trade? " No, fees will never be charged without first discussions with the account holder. If an account is determined to be placing too many non-retail type orders, an associate from the Alpaca Trading Team will reach out and 1) give the account holder an option to change their order characteristics back to ‘retail’ or 2) negotiate a commission fee.
However, each execution partner has guidelines for the types of orders they accept, and each partner has slightly different guidelines which is why there aren’t hard rules for which orders are considered commission free. In any case, the determination is made on an account basis and not an order basis
Does this mean execution partners receive some kind of user id alongside orders, so they can flag the user ids that they consider non-retail and notify Alpaca? Or do execution partners receive orders without any account information attached, and have no way to distinguish orders from different alpaca users?
If it’s the second case, then it means the decision to mark an account as non retail is made entirely on Alpaca’s side, no?
@licnep Orders are sent to execution partners with the account number. Other than that there is no user identifiable information (unless one is a large trader then Alpaca also sends the large trader ID). Periodically, often at the end of each day, trading partners send a report to Alpaca summarizing all trades, the fees/credit for each of those trades, and highlight any problem trades. Alpaca then makes a determination if specific accounts should be routed to different trading partners.
Does Alpaca plan on becoming a direct access broker in the near future? Hypothetically, let’s say an Alpaca user were doing well enough for themselves that the only reason they’re flagged as a non-retail trader is due to large trading amounts or large profits. At that point, I’m having trouble seeing why this user would be inclined to begin paying fees that are on par with API-friendly direct access brokers when Alpaca is not direct access.
@warreng1983 If you mean by ‘direct access’ that Alpaca executes all their own trades, that probably isn’t anytime soon. Most brokers have many different execution options. For example, executing internally, sending an order directly to an exchange, sending to an ATS, or sending to one of several SDPs (see this FINRA article for a good overview). That flexibility gives brokers the ability to route orders for the best execution at the best price.
The statement “…the only reason they’re flagged as a non-retail trader is due to large trading amounts or large profits” is incorrect. There are generally no limits to the amount a ‘retail’ no-commission trader can trade or profit. The amount isn’t what makes an account ‘non-retail’. Take a look here for some of the reasons.
Essentially, I’m working on strategies that don’t do most of the things on that list. But, ultimately I would hope to be trading large amounts (i.e., > 10,000 shares or $200,000) and making decent profits (i.e., generating part time or full time income). So, in that scenario, I’d potentially be flagged as non-retail, yes?
To be clear - we will notify a client via email if the routing on their account is changing and will also make them aware of certain items in that notification. If a client does not consent to the charges then they are not charged.
We have plenty of clients trading in amounts greater than 10,000 shares or 200,000 that are still on the retail route.
@warreng1983 I would not worry about it too much. However, if you are concerned (we understand our users put an immense amount of time building their programs) then you can send a sample trade file to email@example.com ATTN:Allen and we will be happy to review the sample file and share our thoughts over email or zoom if needed.
Yeah, I’m not too worried. It would be a good problem to have, LOL. I just thought I’d give you a heads up on the sorts of things your customers would probably be thinking about if you told them you’d have to start charging them fees. In my mind, if I’m going to be charged fees, I would expect better outcomes with a direct access broker.
Though, who knows. Maybe it wouldn’t make a difference. In all honesty, if I were to reach that point, I would probably divvy my funds up across multiple brokers and execute the same strategies across all of them simultaneously to see which broker offered the best outcomes.