ECN fees

I have always wondered how the ECN (Electronic Communication Network) fees have been assigned as sometimes I see them and sometimes I don't. They are pretty regular when they do appear $0.0037 per share or 37 cents per lot.

I was reviewing my trades of late and realized that anytime I placed a limit order and was filled there was no fee but yet when I place a market order the fee appears. Even though this fee is not a lot it must be calculated into the cost of trading. I am currently playing with 500 share trades so the commission goes to an even $5 ($4.95 is the minimum with Questrade based on 1 cent per share with a $9.95 maximum) and the ECN for a market order is now $1.85 each way. That makes a total cost of a round trip market order trade $13.70. Still not too much of a concern as commissions where over $20 one way...and still are at many brokers.

Looking a bit deeper into the why I find that an ECN charges a fee for trades that remove liquidity from the market. Basically a market order gets executed as fast as possible at whatever price is next in line, sometimes that price is farther away than anticipated, but that is another story. This does not add to the quotes as an order to be filled at a certain price, which means that I am not adding to the liquidity, I am not placing an order to help fill the basket of orders to choose from.

My next test will be to see if I place a limit order far enough into the quotes that it will just get filled as fast as the inside prices are well under what I am willing to pay...this type of order should get executed as fast as a market order...so I expect to still see a fee, but perhaps not. This still meets my needs of not having to dink around with limit orders and missing the trade rather than having to chase the price.

Jeff.