Wondering about Zecco

September 5, 2007 7:34 AM

Have you had any experience with Zecco.com? Are they reputable?

I am thinking of opening an account with Zecco.com which, as far as I know, is the only no-fee online broker. They do charge fees for mutual funds and options, and I guess that's how they make their money, but I still don't understand how they can offer no trading fees.

posted by ducksauce to work & money (6 comments total)

I just opened an account with these folks. It all seems legit. My first couple of trades went through without a hitch. The interface isn't the best, but it's usable.

As long as you keep under 10 trades/day and 40/month you shouldn't be charged a commission (there used to be a minimum balance requirement of $2500, but they seem to have lifted that.)

It seems they're making their money on a combination of google ads, option/mutual fund fees and the interest your money earns between investments. It just goes to show how high the margins must be at the shops that charge 6-10 bucks per trade.
posted by EmptyK at 8:15 AM on September 5, 2007

I've been using it for three months without a problem. My trades were executed quickly and correctly, despite the slightly annoying interface.

As EmptyK said, as long as you don't go over their limits there is no charge for basic trades (I believe it is $3 per trade if you do go over them).
posted by langeNU at 8:23 AM on September 5, 2007

I tried opening an account with them. I neglected to save the PDFs of the forms I needed (since I was at work, figured I'd just grab them when I got home) but then couldn't find the right forms later. E-mailed them for help. Six weeks later, no reply.

I'm sure they're fine if you don't need any support. If something goes wrong, though, don't expect any help.
posted by kindall at 8:30 AM on September 5, 2007

Do not be fooled, they make their money back on spreads. This is OK from casual investor's point of view, just something to be aware of.

Example: let's say you want to buy 100 shares of MSFT. You do a real-time quote and see that the price is $28, so you ask your broker to buy the shares at that price.

A real-time level2 brocker (like thinkorswim.com) will execute your trade immediately, and you will get your shares at the price specified or less. If, at the moment of the trade, MSFT shares actually cost $27.98, you get them at that price and you just saved some money.

A discount or free broker (zecco, etrade, ameritrade) will potentially hang on to your trade for a little while to seek out optimal conditions. Maybe the shares will go down to $27.98. Then they buy the shares at that price, and sell it to you for the price you asked for ($28). Their profit is $.02 * 100 shares = 2 dollars. You get the idea. All of this does really add up.

If you are doing casual investment, this is a perfectly suitable arrangement. If you are doing day trading, this will likely go right against your bottom line, making you liable to become a troublesome, complaining customer. That's why they screen out day traders with limits posted.
posted by blindcarboncopy at 8:30 AM on September 5, 2007 [1 favorite has favorites]

They do deny they make money on spreads, for what's worth:

Do you make money on the spread between bid and ask?
Zecco Trading does not make markets and therefore does not participate in the spread between the bid and ask on any security. All of our orders are entered as agency orders and are therefore never marked up by us. We route all orders through our clearing firm Penson Financial Services who then automatically routes them for best execution.
posted by smackfu at 8:33 AM on September 5, 2007

Looks like I am wrong about Zecco doing this, than. It could be that their clearing firm does market spreads, and pays Zecco a rebate of some sort.

In an effort to be at least somewhat helpful, here are two relevant links:

Why I chose Wells Fargo over Zecco

Don't give your broker a free loan
posted by blindcarboncopy at 11:43 PM on September 5, 2007