Andrew Garrett, Inc., an SEC licensed NASD broker-dealer, has launched BrokerageAmerica, an online retail brokerage firm which offers investors a rebate on every equity transaction, plus commission-free trading for all US equity market orders.
In addition, BrokerageAmerica will offer one of the industry's lowest charges - $5 for each limit order executed by retail investors. The firm claims to be the nation's overall lowest cost online trading outfit, based on competitive brokerage commission and fee structures.
Unlike most other online brokerage firms, retail investors using BrokerageAmerica trade directly with a market-maker - who takes positions in stocks that are being bought or sold online - and bypass brokers who traditionally serve as middlemen in such transactions. By eliminating the middleman wherever possible, cost savings - in the form of rebates - can be passed on to all retail investors who trade with BrokerageAmerica.
The organisation says it will target the growing number of self-directed online investors who want to maximise trading cost efficiency and speed of execution. In particular it will focus on investors who execute an average of five trades per month. Over the course of a year, BrokerageAmerica's pricing model promises to save the average self-directed investor between $500 and $900 (adding together rebates and commission-free transactions), compared with other online brokerage offerings. Rebates will total one-tenth of a cent per share on all transactions, and be deposited directly into each customer's online account. This can be applied to future trading activity or refunded as cash.
"Our business model represents the next evolution in online trading," says Drew Sycoff, chief executive officer, BrokerageAmerica. "It started with Charles Schwab, then Ameritrade and E*Trade took it to the next level. Now, BrokerageAmerica has re-engineered the discount brokerage model, introducing an exciting alternative for self-directed investors who value low cost and speed over commoditised extra services," he says.
As a market-maker and customer order flow origination point, BrokerageAmerica maintains position inventory and open order files in a large number of equities. This means it can match a significant part of its order flow in house. When it has to use third-party market-makers to execute trades, the firm will provide customers with the same per share rebate that it offers on internally executed orders.
In a continuing effort to streamline costs, the firm will not offer equity research or other add ons that the self-directed investor does not want or need. But it will offer a full suite of online account information services, standard market data and a variety of equity order types including limit, stop, day and good-til-cancel orders at a discounted rate, as well as trading of options, fixed income products, load and no-load mutual funds.