---
title: "After the Race to Zero: Post-Game"
url: https://stacklist.com/card/16ca4219-94ea-4639-ad58-cb6d344824ed
source_url: "https://www.linkedin.com/pulse/after-race-zero-post-game-david-m-aferiat/?trackingId=4uQ%2FhtHsQUCTjUiozKCiuw%3D%3D"
stack: https://stacklist.com/c/education/stack/3701d09f-5d84-426c-aef0-e129d294445b
summary: "After Race Zero examines how commission-free trading reshapes the brokerage industry, forcing brokers to differentiate through technology and data services rather than pricing. The shift creates opportunities for advanced tools like AI-powered trading platforms while potentially widening the gap between retail and institutional traders."
tags: "zero-commission, trading, fintech, market-differentiation, retail-trading, broker-evolution, ai-trading"
key_entities: "Trade Ideas (organization), Schwab (organization), zero-commission trading (concept), order flow payment (concept), API unbundling (concept), retail-institutional gap (concept), AI-enabled idea generation (technology), Race to Zero (event)"
classification: "analysis"
content_hash: "sha256:3a4f8b2ad200e245cea22311504b7839ffbd03184cc4296c4e3f3f26d443a4da"
acp_version: "0.2"
token_counts_approximate: 1397
visibility: public
agent_accessible: true
status: "final"
---

# After the Race to Zero: Post-Game

Trade Ideas image, Zero Commission trades sparks a new era. New Era Marks a Shift of Costs and an Opportunity to Differentiate Among Players UPDATE: This article was updated 10/25/2019 to reflect new developments and connect more dots. As we prepare to launch a paper trading service within Trade Ideas, it’s karmic to see traditional brokerages finally race to zero for commissions. We’re asked by customers and affiliates, “How do these moves affect Trade Ideas?” Our mission remains the same: we help clients make better market decisions. Overall, commission-free trading is a good development. It shifts where brokers and customers will decide to spend. What were once sources of revenue are now cost centers (or centers with significantly lower revenue). The remaining levers for generating revenue where DARTS (Daily Average Revenue Trades) once existed are: payments for directing customer order flow to different parties for trade execution, net interest margin (where brokerage pays out less than market rate X% for cash interest in an account and receives the market rate), margin interest, and credit interest for short trading. Will these amounts without commission revenue offset the ongoing investment in software platform development? There is an upside. Brokers, having spent years bundled their own technology into platforms with custom toolsets will find an easier path unbundling and sourcing the best, most appropriate tools and technologies for their customers from outside the firm via a renewed emphasis on APIs. Additionally, open execution APIs allow partners like Trade Ideas to build trading capabilities within their own technology. The thinking here is as long as the broker can handle the trade, it does not matter what the source is. In an unbundled platform, with commission-free trading, brokerages seek differentiation (as always) but on something other than price. We've already seen Schwab roll out its fractional share trading capability (they clearly were planning this for some time). Brokers are motivated between now and next quarter's earnings call to create curated trading experiences ideally driven by customer segmentation and feedback loops based on trading decisions. For advanced toolsets and technology offered, customers may “pay for what they need”. Advanced technologies, like Trade Ideas’ AI-enabled idea generation and risk management, including AI-powered paper trading, are perfect examples. We are already working with a handful of brokers to subsidize these services for key clients. For customers, the impact is best summarized by the old adage, “when the product is free, YOU are the product.” If commission-free trading is used, customer trading history may be leveraged to the benefit of both the customer and broker. Customers can expect to receive advanced insight into their trading decisions and behaviors. Brokers may use the collective data, like payment for order executions, to receive payment from others willing to mine the data. Without sufficient revenue from such arrangements, in a world of free trading, an imbalance may emerge. Here’s the paradox of zero commission trading: left unchecked, free trades for the retail trader widens the gulf in technology between retail and institutional market participants and threatens the quality of order execution. On one side stands retail traders with free trades but little else and on the other side stand institutions with advanced tools/technologies and the willingness to pay for them. Free trading may actually harm retail customers we will come to find out. Without innovative tools for idea generation and risk management, periods of higher than usual VIX environments will generate too frequent, over trading conditions as people act out of fear and greed - behaviors that will quickly diminish a trading account. Only when data about client trading decisions benefit the broker's service and lead to positive insights fed back to the client in order to make better decisions, can this work for everyone. One data feedback loop example includes summaries of client trading performance and the technical, fundamental, even social media conditions associated with the profitable decisions and, more importantly, the ones that incurred a loss in order to help customers improve decisions. Another example: Brokers can mine usage data to better target educational resources, rewards for model account behavior. There is a goldmine of insight that can be tapped here for everyone's benefit. Firms have the opportunity to provide more robust reporting of their customers’ trading behaviors in the effort to further improve their decisions. If they are unable to mine the existing mountain of customer data upon which they sit, there are capable partners, like Trade Ideas, who apply robust behavioral analytics in the service of better decisions. This is the golden era many people dreamed and asked for since markets became digital. It is a great time to reengage the public about the benefits of a well- run capital market for a healthy economy. I am already seeing classes in trading and investing in the markets flow down from college campuses and into high school. This is a welcome trend that zero-cost commissions will accelerate. Let’s not assume that free costs to trade means no cost for consistently good decisions. Ultimately it is a shift of spending from commissions to education, technology, and self-improvement that will yield better decisions. Who will help customers make these choices? I’m proud to be part of a team doing this daily.