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I have a trading system I would like to test for the S&P 500, or another very similar instrument. I'm looking to make approximately 10-15 trades per month. I know if you have a Vanguard account, you can trade their ETFs for no commission, but them limit you to 25 trades in a 12 month period. Are there any other brokerage that let you trade certain instruments without paying a comission?

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3 Answers

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Take a look at Schwab:

http://www.schwab.com/public/schwab/investment_products/etfs/schwab_etfs

http://www.schwab.com/public/schwab/investment_products/mutual_funds/no_fee_funds.html

Pro-funds ========:

http://www.profunds.com/overview/content/faqs.html

http://www.proshares.com/faqs/

Rydex ========:

http://www.rydex-sgi.com/products/mutual_funds/home/mf_home.rails

http://www.rydex-sgi.com/products/etfs/home/etf_home.rails

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So I could trade a Shwab ETF 100x a day, commission free? Why do they allow this, while vanguard does not? – Zach Apr 21 '11 at 19:59
@Zach: You could e-mail them and ask, but my guess is, they're making the market for those Schwab ETF's (they get the bid/ask spread). If you assume a 0.25% bid/ask spread, then 100 trades per day gives them (100 * 0.0025) = 0.25 or 25% of the "notional trade" for that day with very little risk. I'd take that deal. – bill_080 Apr 21 '11 at 23:33
Gotcha, that makes sense. I guess Vanguard isn't making the market for their own ETFs? – Zach Apr 22 '11 at 0:17
@Zach: Vanguard may be making markets, I don't know. Keep in mind that with your example, to get 100 trades in one day, you would probably have to trigger those trades as "market orders". On an ETF, especially a specialized ETF, that spread may be a lot bigger than the 0.25% in my calcs. As a result, there's not as much "day trading" with Schwab's no-fee ETF's as you might expect. For future reference, this situation is called "Internalization". sec.gov/answers/internalization.htm – bill_080 Apr 22 '11 at 0:42
up vote 3 down vote

Here's a rundown of the various commission-free options out there. Doesn't give any info on maximum number of trades but that shouldn't be very hard to find on the providers' websites.

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up vote 2 down vote

I think you've misread the weasel words about Vanguard ETF trades:

If you buy and sell the same Vanguard ETF in a Vanguard Brokerage account more than 25 times in a 12-month period, you may be restricted from purchasing that Vanguard ETF through your Vanguard Brokerage account for 60 days.

Source.

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You're right, but I'm still planning to buy and sell 1 ETF more than 25 times in a 12-month period – Zach Apr 26 '11 at 12:52

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