Most desks know their brokerage rate. Far fewer know their annual brokerage bill. The calculation takes one line, and it is worth running on your own numbers.
Brokerage is usually quoted as a rate, so much per million traded or a fraction of a basis point of notional. A rate is easy to accept. An annual total is harder to ignore, and it takes one line to work out.
Annual brokerage equals trades per day, times trading days per year, times average trade size in millions, times the rate per million.
For interest rate swaps, where the rate is quoted in basis points of notional, convert first. One basis point on one million of notional is one hundred in the trade currency, so a rate of 0.05 basis points is five per million.
Take an FX swaps desk that executes 40 tickets a day at an average size of 25 million, for 252 trading days, at 0.50 per million.
40 times 252 times 25 times 0.50 comes to 126,000 a year, in the currency traded. Double the tickets and the bill doubles, whether or not the extra trades made money.
These inputs are illustrative. The rate is the opening default on The Meter for FX swaps, set between a funding average near 0.20 and a one month average near 0.80. Your own figures will differ.
FX swaps. Charged per million traded. The Meter opens at 0.50.
NDFs. Charged per million traded. The Meter opens at 2.75.
Interest rate swaps. Charged in basis points of notional. The Meter opens at 0.05 basis points.
Bonds. Charged per million traded. The Meter opens at 3.60, the midpoint of an observed range for electronic execution.
Each default sits between stated market averages rather than at the favourable end, and none is attributed to any firm.
The annual total is only the visible part. Per ticket pricing also shapes how a desk executes, because every hedge, every roll and every order split into smaller pieces carries a charge. What per ticket brokerage actually taxes.
A subscription is not cheaper for every desk. If a desk trades rarely, a flat fee can cost more than per ticket brokerage, and the calculation will show it. What a subscription trading platform is, and who it is for.
The Meter runs this calculation for FX swaps, NDFs, interest rate swaps and bonds on the figures you enter. Nothing you enter is published, and where per ticket brokerage is cheaper on your assumptions, it says so.
How do I calculate annual brokerage?
Trades per day, times trading days per year, times average size in millions, times the rate per million.
How many trading days should I use?
252 is the standard convention. Use your desk’s own calendar if it differs.
How do I convert basis points to a rate per million?
One basis point on one million is one hundred, so multiply the rate in basis points by one hundred.
Is a subscription always cheaper?
No. It depends on how much a desk trades. The Meter shows where the line falls on your own figures.
How does IDBX charge?
A fixed monthly subscription per active trader, with no per ticket brokerage.