How can SogoTrade offer $3.00 commissions?
Vertical Integration, Scale, and Efficiency
At SogoTrade, our goal has always been to provide the best value to our customers, combining friendly service, advanced trading technology, and fast executions with one of the lowest commission pricing in the industry. However, with commission fees as low as $3.00, when compared to other brokers that charge $9.99 or more for the same service, many wonder how SogoTrade is able to be profitable, let alone thrive. The key to SogoTrade’s growth, popularity, and success has always been our connection to Wang Investments, a leading broker/dealer specializing in meeting the needs of professional and institutional traders. Our firm is built from the ground up on the principles of vertical integration, scale, and efficiency, which, in combination, allows us to provide the highest levels of service at a much lower cost than many of our competitors. We can operate more efficiently than other firms, and we pride ourselves on being able to pass those savings to our customers through lower commissions. Here is a look at the structure of Wang Investments and SogoTrade,
the company Forbes magazine calls “The Deepest Discount Broker.”
Wang Investments: A Vertically Integrated Self-Clearing Broker
Wang Investments is a vertically integrated self-clearing broker/dealer. This means that unlike many of our competitors who must outsource large portions of their business to other firms and pay hefty service or licensing fees, Wang Investments operates all the major brokerage functions in-house. We are a data vendor, a technology developer, and a clearing firm all in one, a distinction that allows us to reduce costs, increase efficiency, and offer the most competitively priced services.
Economies of Scale
Doing everything in-house, from clearing to development, necessarily means higher overhead and higher costs; however, by integrating all the major brokerage functions, Wang Investments and SogoTrade has achieved a level of success and scale that allows us to remain profitable even while offering some of the lowest commission in the industry. Wang Investments and SogoTrade frequently execute and clear over a hundred million shares a day, representing on average 2-4% of NASDAQ’s daily trading volume. Comparing 4Q 2007 trading volume figures, many are surprised to learn that in terms of tickets processed and shares transacted, Wang Investments and SogoTrade can match or exceed the trading volume of many of our better-known competitors. By spreading our higher fixed overhead over a large trading volume, by leveraging our economies of scale, and by constantly watching our costs, Wang Investments and SogoTrade have created a structure and a culture that allows us to offer some of the lowest commissions without sacrificing service, quality or profitability.
Online Brokerage Trading Volume Comparison
|
|
SogoTrade/Wang Investments
|
Etrade
|
TD Ameritrade
|
OptionsXpress
|
ThinkorSwim
|
Charles Schwab
|
|
Online Equity Trade Commission
*1
|
*2
$3.00
|
$6.99-9.99
|
9.99
|
$9.95
|
9.99
|
$9.95-12.95
|
Average Daily Revenue Trades
(Q4 2007)
|
237,067
|
214,000
|
322,000
|
44,500
|
39,100
|
275,500
|
|
Average Daily Shares Traded(Q4 2007)
|
71,877,158
|
53,500,000
|
80,500,000
|
11,125,000
|
9,775,000
|
68,875,000
|
|
Average Daily Revenue Trade Multiple (Wang Investments/Other)
|
|
1.11
|
0.74
|
5.33
|
6.06
|
0.86
|
|
Average Daily Shares Traded Multiple (Wang Investments/Other)
|
|
1.34
|
0.89
|
6.46
|
7.35
|
1.04
|
*1
Prices for competitors were obtained on January 23rd, 2007 and are believed but are not guaranteed to be accurate. Some of the firms listed above may reduce or waive commissions or fees depending on account activity or total account value.
*2
For stocks priced under $1.00, the online commission is $3 plus ½% of the principal value.
View Examples.
Sources