Hidden Cost of Free Trading? $34 Billion a Year, Study Says (1)

Last year, five US professors opened two brokerage accounts and placed identical orders to test an algorithm. The next day, one was down by $150. The other was up $12.

They discovered it wasn’t a one-time anomaly.

Over more than five months, the academics used their own funds to execute 85,000 trades in 128 different stocks and made what they consider an important discovery: They were getting significantly different prices to buy and sell shares, depending on which brokerage handled the trade. Extrapolating from the results, they estimate it costs small-time US investors as much as $34 billion a year, ...