Glossary
Commission
A fee a broker charges for executing a trade; most US online brokers now charge zero commission on stock trades.
A commission is a fee a broker charges for carrying out a trade on your behalf, typically a flat amount per trade, a charge per share or per options contract, or a percentage of the trade's value. For decades it was the main cost of investing in individual stocks. Since October 2019, when several large US online brokers dropped them within days of each other, most online stock and ETF trades in the US have carried no commission at all.
What you may still pay
"Commission-free" does not mean cost-free:
- Options usually carry a per-contract fee at major brokers, often under $1 a contract.
- Regulatory fees apply to sales of stock: the SEC's Section 31 fee and FINRA's trading activity fee are tiny per trade but appear on confirmations.
- Broker-assisted trades, some mutual funds, bonds and foreign stocks may still carry commissions or markups.
- The bid-ask spread and execution quality are implicit costs on every trade, and brokers earn revenue from payment for order flow, cash balances and margin interest instead.
Commissions in other contexts
Financial advisers and insurance agents may be paid commissions on products they sell, such as annuities or funds with sales charges ("loads"), which can create conflicts of interest. A fee-only adviser instead charges clients directly. Asking how someone is paid is one of the simplest ways to understand the incentives behind a recommendation.