TD Ameritrade is one of the most popular discount brokerage firms in the United States, falling on the pricier side in regard to commissions. While it is easy for a trader to commoditize brokers and choose the cheapest option, there is merit to Ameritrade’s high commission fees at $6.95 per equity trade.
ABOUT TD AMERITRADE
TD Ameritrade is a publicly traded brokerage firm trading under the ticker symbol AMTD. In the trading world, Ameritrade is best known for their acquisition of the coveted ThinkOrSwim trading platform. The platform is one of Ameritrade’s main selling points for its higher fees relative to the industry.
Founded in 1971, the firm slowly grew into the behemoth it is today, playing a role in many key innovations in trading history. They were the first company to offer trading over the phone, and among the first brokers to offer online trading.
SELLING OF ORDER FLOW
Like most discount brokers nowadays, Ameritrade sells their clients’ order flow to market maker firms, so that the market makers can get first access to that liquidity. This provides no value to the client and many call it a break of the broker’s fiduciary duty to their clients.
DIRECT ROUTING
Ameritrade offers their clients the choice to select the route to send your order, giving you the ability to send direct orders to the market makers/ECNs that allow for it.
LACK OF DIRECT MARKET ACCESS
Ameritrade is not a direct market access broker. Your order is sent through the internet to Ameritrade. Direct access brokers (such as SpeedTrader) allow traders to route the orders directly to the market, which can improve execution speed and fills. That said, this type of feature will be overkill for beginner/intermediate traders.
BORROWING AND LOCATING SHARES FOR SHORTING
It is easy to borrow most large and mega cap stocks at Ameritrade but they offer no significant advantage in locating shares. It’s rare that the trending penny stock of the day/week will be available to borrow. When a stock’s shares are hard to borrow, you often have to call Ameritrade and ask them to locate you the shares, which can be hit or miss.
CUSTOMER SERVICE
TD Ameritrade has garnered a reputation for excellent customer service. They offer 24 hour email or phone customer service. Anytime I have experienced an issue, a simple live chat or phone call cleared the issue up in minutes.
WHAT TYPE OF TRADER IS TD AMERITRADE IDEAL FOR?
TD Ameritrade stands out as one of the top discount brokers for traders of a wide range of skill levels. The company rivals ETRADE for the spot of #1 discount broker and is much preferred over Scottrade.
TD Ameritrade has a great suite of trading tools and ThinkOrSwim is one of the top trading platforms for technical traders. This is a great broker for traders of all skill levels and styles.
PROS
- Probably the best and easiest to use retail trading platform on the market
- Diversity of services offered. You can do almost everything through Ameritrade
- 24 hour customer service
- Overwhelming research offerings
CONS
- High commissions relative to their industry
- They receive payment for order flow
- Offer no advantage over other brokers in borrowing shares to short
SUMMARY
TD Ameritrade is an excellent, all-in-one, big-box broker offering just about all types of securities for trade, and a great set of tools in the form of platforms and research. Most traders and investors would be served well using Ameritrade for most of their trading.
Ameritrade is like the Amazon of stock brokers, they offer almost everything in one place, in an easy to navigate and easy to execute fashion. However, due to the nature of their broad approach, there are lots of niche operations doing specific affairs better than them.
If you’re a day trader, algorithmic trader, short seller, or under-capitalized trader, there are better brokers out there for you. These are not the areas that Ameritrade exceeds in.