Which commission structure would likely benefit a high-frequency trader the most? A) Percentage Commissions B) Degressive Commissions C) Flat-rate Commissions D) Fixed Commissions
Understand the Problem
The question is asking about the most beneficial commission structure for high-frequency traders, which involves analyzing different commission models and their impact on trading frequency and costs.
Answer
Flat-rate Commissions
Flat-rate Commissions would likely benefit a high-frequency trader the most because they pay a fixed commission per trade, regardless of trade volume. This allows traders who make many trades to manage costs more effectively.
Answer for screen readers
Flat-rate Commissions would likely benefit a high-frequency trader the most because they pay a fixed commission per trade, regardless of trade volume. This allows traders who make many trades to manage costs more effectively.
More Information
High-frequency traders often make numerous trades in a short period. A flat-rate commission structure means that they pay the same fee no matter how many trades they execute, making it cost-effective compared to commission structures that increase with volume or percentage.
Tips
A common mistake is not considering the cumulative cost impact of percentage-based commissions for high trading volumes.
