Commission-free trading usually means a broker does not charge its own commission for eligible online stock or ETF trades. It does not mean the trade is completely free. You may still pay regulatory fees, bid-ask spreads, fund expenses, options contract fees, margin interest, bond markups, currency-conversion costs and account service charges.
As of April 4, 2026, the SEC Section 31 fee is $20.60 per $1 million of covered securities sold. That fee is small for most investors, but it shows why a $0 commission does not equal a $0-cost trade.
Commission-Free Trading Costs at a Glance
| Cost | When it applies | How it affects you |
|---|---|---|
| Bid-ask spread | Every trade, especially in less-liquid securities | You may buy above the market midpoint or sell below it |
| SEC Section 31 fee | Usually covered stock and ETF sales | A small regulatory charge that some brokers pass through |
| FINRA Trading Activity Fee | Certain covered sales, including some equity and options transactions | Usually a small pass-through charge |
| Options contract and exchange fees | Options trades | May apply even when the base commission is $0 |
| Fund expense ratio | When you own a mutual fund or ETF | Reduces investment returns over time |
| Margin interest | When you borrow from the broker | Can become a recurring cost |
| Bond markup or markdown | Many bond trades | Compensation is built into the trade price |
| Account and service fees | Transfers, wires, paper statements and special services | Charged according to the broker's fee schedule |
| Foreign exchange spread | Trading securities or currencies in another currency | The conversion rate may include a markup |
What Does "Commission-Free Trading" Actually Mean?
Commission-free trading means the broker has removed its own charge for placing an eligible online trade. The offer may cover only certain products, such as U.S.-listed stocks and ETFs.
It may not cover options, futures, bonds, mutual funds, foreign securities, broker-assisted trades or special order types. Charles Schwab, for example, advertises $0 online commissions for listed stocks and ETFs but charges $0.65 per options contract. Fidelity also lists $0 online U.S. stock, ETF and base options commissions while stating that options contract fees apply.
Check which products and services are included in the $0 commission offer before opening an account.
1. Bid-Ask Spreads Are an Indirect Trading Cost
The bid-ask spread is the difference between the highest price a buyer is offering and the lowest price a seller will accept.
For example:
- Bid price: $49.95
- Ask price: $50.05
- Spread: $0.10
A market order to buy may execute near the ask price. A market order to sell may execute near the bid price. The broker may not list the spread as a separate fee, but it still affects your return.
Spreads are usually narrower for liquid securities such as large U.S. stocks and major ETFs. They can be wider for small-cap stocks, over-the-counter securities, options, securities traded outside regular market hours and volatile assets.
Brokers may also receive payment for order flow from market makers. This payment is not automatically an extra charge to you, but it creates a potential conflict because the broker receives compensation for routing orders. Brokers still have best-execution obligations and must seek reasonably favorable terms for customer orders.
Use a limit order when controlling the execution price matters, particularly for thinly traded or volatile securities.
2. SEC Transaction Fees Can Apply When You Sell
The SEC Section 31 fee generally applies to sales of covered securities, not purchases. Brokers may pass the charge to customers under a name such as "SEC fee."
The SEC does not bill individual investors directly. Self-regulatory organizations pay the SEC, broker-dealers pay related charges imposed by those organizations, and brokers may pass the cost to customers.
As of April 4, 2026, the SEC Section 31 rate is $20.60 per $1 million of covered securities sold. The rate can change when the SEC issues a new fee advisory.
A $100,000 covered sale would produce an SEC-related charge of approximately $2.06, before any broker-specific rounding or minimum-charge policy.
The fee is usually small for a long-term investor. It matters more to people who sell large amounts or trade frequently.
3. FINRA Trading Activity Fees May Also Be Passed Through
FINRA charges brokerage firms a Trading Activity Fee on certain transactions, including covered equity and options sales. Some brokers absorb the cost, while others pass it to customers.
The amount depends on the security type, the number of shares or contracts and the broker's current fee policy. Robinhood's published 2026 schedule, for example, lists a FINRA Trading Activity Fee of $0.000195 per share for eligible equity sales and $0.00329 per options contract for eligible options sales.
The fee is usually minor for a long-term investor. It matters more to frequent traders, options traders and customers placing large orders.
4. Options Can Have Contract, Exchange and Regulatory Fees
"Commission-free options trading" often means the broker has removed its base commission. Other options-related charges may still apply.
Possible charges include:
- Per-contract fees
- Options Regulatory Fees
- Options Clearing Corporation fees
- Exchange fees
- FINRA Trading Activity Fees
- Exercise or assignment-related charges, depending on the broker and product
Charles Schwab lists a $0 base commission plus a $0.65 per-contract fee for online options trades. Robinhood states that it does not charge per-contract fees on stock and ETF options, but it may still charge index option contract fees and applicable regulatory or exchange fees.
Compare the complete contract-level fee schedule before choosing a broker for options trading.
5. ETFs and Mutual Funds Have Investment-Level Expenses
A $0 trading commission does not remove the operating expenses charged by an ETF or mutual fund.
These expenses are generally reflected in the fund's expense ratio and reduce the fund's net return over time. The fund charges them, rather than the brokerage platform.
Mutual funds may also have:
- Sales loads
- Redemption fees
- Short-term trading fees
- Transaction fees for funds outside the broker's no-transaction-fee network
Fidelity, for example, lists a $49.95 transaction fee for certain non-Fidelity mutual fund purchases and a $49.95 redemption fee for some no-transaction-fee funds sold within 60 days.
Check the broker's transaction-fee schedule and the fund's prospectus before buying.
6. Margin Interest Can Be the Largest Cost
A commission-free trade can become expensive when you borrow money to make it.
A margin account lets the broker lend you money using your securities as collateral. You pay interest on the amount borrowed, and the interest continues to accrue while the loan remains outstanding. Margin rates vary between firms.
Borrowing $10,000 at an annual margin rate of 10% would cost approximately $1,000 per year before compounding and rate changes.
Margin interest can outweigh any savings from commission-free trading. It can also increase losses and expose you to margin calls or forced sales if your investments decline.
7. Bond Trading May Include a Markup or Markdown
Brokers often do not charge a traditional commission on every bond trade. Instead, their compensation may be included in the bond's price.
A markup increases the price you pay when the broker sells a bond to you. A markdown reduces the price you receive when the broker buys a bond from you. Investor.gov identifies markups and markdowns as common transaction costs when a broker trades from its own inventory.
Compare the quoted price with recent market prices. You can also ask whether the broker is acting as principal or agent.
8. Foreign Securities Can Involve Currency-Conversion Costs
Trading a foreign stock or currency may involve a foreign-exchange spread or conversion markup. A platform can advertise commission-free forex trading while building its compensation into the bid-ask spread.
The SEC warns that commission-free foreign-currency transactions can still carry costs through wider spreads.
The same issue can arise when buying foreign securities that must be converted into U.S. dollars.
9. Account and Service Fees May Still Apply
A broker may charge for services unrelated to placing an eligible online stock or ETF trade.
Common examples include:
- Wire transfer fees
- Full or partial account transfer fees
- Paper statement fees
- Account closure fees
- Broker-assisted trading fees
- Account maintenance fees
- Inactivity fees
- Special handling or administrative fees
Not every broker charges all of these fees, and many large platforms have removed some of them. The charges depend on the broker, account type and service used. Investor.gov recommends reviewing the brokerage agreement, relationship summary and full fee schedule before opening an account.
How to Check the Real Cost Before Opening an Account
- Confirm what the $0 commission covers. Check stocks, ETFs, options, bonds, mutual funds and foreign securities separately.
- Review the broker's fee schedule for regulatory, exchange, clearing and pass-through fees.
- Check the margin rate. A low trading commission does not offset an expensive margin loan.
- Review order-routing disclosures for payment for order flow and execution-quality information.
- Compare the bid and ask prices before submitting a market order.
- Review the ETF or mutual fund expense ratio, along with any loads or redemption fees.
- Look for transfer and wire charges.
- Read the trade confirmation. It should show the execution price and any charges applied to the transaction.
Bottom Line
Commission-free trading removes one visible cost, but it does not eliminate the cost of investing. For ordinary stock and ETF investors, the main remaining costs are often the bid-ask spread, fund expense ratio and occasional regulatory fee. For options traders, contract and exchange fees matter more. For margin users, interest is usually the largest cost.
The lowest-cost broker is not necessarily the one advertising the lowest commission. It is the broker whose total cost matches the products, order types and account services you use.