Virtual Brokers, a Toronto-based discount brokerage, announced on Tuesday that it is now offering a commission-free account structure for do-it-yourself investors.
However, commission-free doesn’t mean zero cost. Clients of Virtual Brokers’ commission-free account will pay a monthly platform fee as opposed to discount brokerages’ more traditional per-trade pricing model.
Investors can choose from one of 10 different platforms that Virtual Brokers offers. Fees for each platform vary depending on the platform’s offering and whether it’s web-based or application-based.
For example, the web-based VB WebTrader Streamer platform costs $35 a month, whereas the application-based Power Trader Pro platform costs roughly $357 (US$250) a month.
“What we’re trying to do is take away the variable costs from people,” says Bardya Ziaian, founder and CEO of Virtual Brokers, a division of BBS Securities Inc. “If your variable cost is the more you trade the more you’re going to get charged, we’re trying to take that away and trying to give you the constant costs of the platform fee.”
In addition to the platform fee, Virtual Brokers will pass on costs to an investor depending on the type of trader he or she is. For example, an aggressive trader may be charged an electronic communication networks fee as well as a clearing fee.
Whereas most discount brokerages must charge on a per-trade basis because of clearing costs, Ziaian says Virtual Brokers is able to reverse that pricing model because of its proprietary clearing software, Pario: “Our cost is extremely low to clear. We found a way to pass that margin to clients.”
Virtual Brokers will continue to offer a per-trade pricing model, called “Classic Commission,” to its current and new investors who don’t wish to use the commission-free model. Investors using the classic model will be charged $9.99 per equity trade.