Inside track: exchange fees

You may have heard of certain fees called ECN and ATS fees or have seen them on your statement. So, what are they? And how can you avoid paying them?

 

Electronic communication networks (ECNs) and alternative trading systems (ATSs) are intermediaries that connect brokers to the market. They facilitate all transactions and add liquidity to the markets. ECNs apply to US listed securities while ATSs apply to Canadian securities. In general, ECNs and ATSs charge fees whenever an order removes liquidity from the market. This  may add on to the cost of your trade in addition to general commissions. Here are some of the most commonly asked questions:

 

Are ECN and ATS fees avoidable?

 

One method of avoiding ECN fees when trading US securities is by not sending your order directly to the market. You can do this by changing the order route to either MNGD or LAMP. For those trading Canadian stocks, ATS fees cannot be avoided by re-routing orders.

 

Another method both ECN and ATS fees can be avoided is to ensure orders you place are not removing liquidity from the market.

 

What is considered removing liquidity and how can I prevent this from happening?

 

Both opening (buys and shorts) and closing (sells and covers) trades can remove liquidity if they fall under one of these categories:

  • Market or marketable limit orders (i.e. buy orders with limit prices equal or greater than the ask price, sell orders with limit prices equal or less than the bid price)
  • Stop orders or stop limit orders where the limit order is immediately executable (i.e. stop and limit prices are the same)
  • Orders with special instructions such as AoN, FoK, etc. (You can read more about these, and other order types on our blog)
  • Orders executed at the open/close of market hours or outside of regular market hours
  • Orders executed on any illiquid stocks

 

Using orders that do not fall into any of the above criteria will increase the likelihood of not removing liquidity from the market and not having to paying any ECN or ATS fees. It is important to note that these fees are only charged at the time of order execution.

 

How much are ECN and ATS fees?

 

ECN and ATS fees are charged on a per share basis. Please see the table below or visit this page for a more detailed breakdown of these fees.

 

 

What about SEC fees?

 

The SEC charges a fee for all trades on U.S. listed securities. The difference between an SEC and ECN fee is that SEC fees are based on the total value of the trade as opposed to the number of shares being traded and SEC fees cannot be avoided. Effective April 1, 2012, the fee is calculated at $0.0000224 x the value of the trade. E.g. selling 100 shares of a U.S. stock at $30 (100 x $30 = $3,000) will incur an SEC fee of USD $0.07 (0.0000224 x $3,000). SEC fees can be charged in conjunction with ECN fees.  

 

How can I view my ECN and SEC fees paid?

 

You can view these fees on your IQ trading platform by editing the columns under the executions tab to display ECN fees and SEC fee. See our help & how to for more information. ECN and SEC fees also appear on your monthly e-statements.

 

If you have any questions, please leave a comment below. 

What do you think? Login to comment on this article.

  • Thank you for these tips in how to avoid fees by not removing liquidity from market. I needed a reminder.

  • Thanks for the info.  In April I bought 5300 shares of MND.TO via a limit order for less than 1.00 per share and paid a total ECN/ATS fee of $0.24

    Can you explain how the fee was applicable in this case?  My guess is that 5300 shares is some sort of odd lot size for a share priced less than 1.00 per share.

    p.s.  Will I get emailed when someone replies to this?

  • Hi slowfox,

    Thanks for your question. A limit order doesn’t always guarantee that ECN fees won’t be charged. Please contact our client services team at 1.888.783.7866 so they can provide you with a more detailed answer for your order.

  • Nice scam questrade. I guess its my own stupid fault for not thoroughly reading the small print and falling for your marketing scam..$4.95 FLAT FEE TRADING! ....flat, yeah right.  very underhanded your marketing, im not shocked, but a little surprised, i didnt expect this petty scam from a canadian broker.  I will transfer out  as soon as possible.

  • Hi torque,

    The $4.95 fee refers to our commission. However, depending on the order type you use, you may be subjected to an ECN fee charged by the exchange. This blog also outlines how you can place orders to avoid ECN fees.

    If there’s something in particular you’re unhappy with, let me know and I can help look into it for you.

  • I placed a limit order to buy 13,000 shs. of a VSE stock @ .23 when the market price was .27/.28 bid/ask..Normally the commission doesn't show up on Questrade but this time I saw a comm. of $20 @ some cents..When I inquired , Charlene from Questrade tried to give me an explanation(after speaking to her supervisor) but she admitted she really didn't understand the concept but would send me a link to read about ECN's...The link mentions ECN's on USA stocks..I am still confused & would appreciate an answer on the specific order mentioned above...tks

  • Hi Linus4,

    Thanks for your questions. I’ll have someone from our client services team look into this order and contact you about a resolution.

  • The money that is derived from ECN and ATS fees. What is done with it? Is it somehow used to return liquidity to the intermediate markets?

  • I understand that ECN/ATS fees are charged when liquidity is removed from the market. One of the ways that liquidity is removed, as listed in your help resources, was trading at market open/close or outside of market hours. Is there any way that I can delay a trade that I request in the evening so that it is registered after the market opening time that could result in these fees? As a small-scale investor with a full time job I am not able to trade during regular market hours, but obviously don’t want to have to pay the extra fees.  Can I get around them? What do other working folks due to avoid fees after hours?

  • Hi Seaside, once the proceeds from ECN fees goes to the exchange, I’m not sure exactly what is done after that. However, what I can tell you is that it likely does not return liquidity to the market.

    Greg B, the most common way to avoid ECN fees is by using limit orders where the bid or ask is sufficiently below or above the current bid/ask price. To answer your question, yes, you could place these orders after hours and have them still active the next day.

  • Thanks! Still have not got my head wrapped arround order flow, routing and excution. Fasinating stuff! :)

  • Glad I found this all out. Too bad I didn't find it our sooner. I am getting raped $73 and $20 commission fees. Thanks but no thanks. Back to TD for me.  Your explanations don't make sense, nor does your blog, or anyone trying to explain this bullsh*t by phone. It's a rip off. Plain and simple. There has NEVER been a trade of mine where I have paid less than $10 fees.  But $73 and $20? hahaha  nice try. You have lost a customer.

  • questions re ECN & SEC fees

    To quote above

    "Market or marketable limit orders (i.e. buy orders with limit prices equal or greater than the ask price, sell orders with limit prices equal or less than the bid price)"

    1) Am I understanding this correctly, in other words a limit order place outside of the bid ask spread?

    2) What/who defines an "illiquid stocks"?

    3) If the SEC is charging me the SEC fees then why does Questrade charge more than BMO Investorline?

    0.0000192 - BMOs SEC fees

    0.0000224 - Questrades SEC Fees

    4) Who sets the SEC fee? Is it the SEC or is it the broker?

  • ECN/ATS fees are charged to Questrade by the exchange, what we pay is a fee charged by Questrade that is intended to cover these  costs, some broker do it that way and some build it into a commission structure. depends a lot on what kind of trading you do what is better. if you are trading a lot of penny stocks it can be an issue for sure, for day trading penny stocks either a flat rate like TD or a direct order type of arrangement like IB might be better -- for my type of trading, 5-20 trades per month with Canadian stocks/etfs in the 3 - 30 dollar range, i can not find a better rate than Questrade anywhere that i know of :)

  • i think you do understand that correctly, if it is outside the bid/ask spread and was filled immediately chances are it removed liquidity, the SEC fee is set by the SEC and paid regardless of liquidity, it only applies to US securities so i have no experience with it to speak of

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