Online brokerage is a crowded field, with several firms competing for mainstream investors. Some firms take the different approach of positioning themselves for a specific segment of the market. Lightspeed Trading is a firm that seems structured to appeal more to active, high-volume traders than to casual investors.
Who is a good fit for Lightspeed Trading?
Lightspeed Trading ranked sixth in a recent MoneyRates.com survey of the best online brokers. This placed it in the top third of the field of 19 brokers, but because of its pricing Lightspeed might rank even higher with heavy traders.
While many online brokers have gone to a flat-rate commission schedule, Lightspeed's is still based on cents-per-share, though with a minimum commission of $1 per trade. This minimum is likely to apply on most trades of 220 shares or less.
The cents-per-share rate declines depending on how much monthly trading volume you generate. If you trade less than 250,000 shares per month, you will pay a commission of 0.45 cents per share. Once you reach the 250,000 share threshold, the rate drops to 0.35 cents per share, and then the rate drops steadily at a variety of other volume thresholds, down to a low of 0.10 cents per share for people who trade over 15 million shares per month.
This mix of cents-per-share trading with a $1 flat-rate minimum makes Lightspeed a little difficult to compare to other brokers who use purely a flat rate, but generally speaking on trades of 1,100 shares or less, Lightspeed's cents per share rate would be very competitive with the $4.95 price point that is popular with brokers today. Lightspeed's commission rate would also be competitive with the category average flat rate of $6.05 per trade on trades of around 1,340 shares or less.
Lightspeed also represents a cost-effective solution for margin traders, with the second-lowest margin interest rate in the MoneyRates survey.
The prospect of $1 flat rate commissions might be very appealing to smaller investors, but Lightspeed has a minimum account size of $10,000, which was tied for the highest minimum found in the MoneyRates.com survey. Still, other than people who are just starting to wade into the stock market, even this minimum should not be much of an obstacle for most serious investors.
More experienced investors are not only more likely to be able to afford Lightspeed's minimum, but they also should be familiar enough with their own investment habits to be able to project how Lightspeed's variable commission scale is likely to translate to their trading patterns. These same investors are also likely to know what they need from a brokerage firm in terms of resources. Lightspeed, for example, provides more in the way of technical trading tools than it does fundamental company research.
One concern to keep in mind is that Lightspeed did have a higher frequency of regulatory incidents and client disputes than most of the firms in the MoneyRates survey. The more experienced investors Lightspeed is likely to appeal to may feel confident enough in their ability to look after their own interests to dismiss this concern.
Choosing a broker is largely about knowing what you want. If you are looking for a cost-effective solution for high-volume trading strategies, you may well find Lightspeed to be a good fit.