What Your Broker Won't Tell You About Fees
StatsEdgeTrading
Your broker makes more money on locates than commissions. Let that sink in.
We brought Brandon Kaisler from CESA Capital onto Line Your Own Pockets this week — 19 years in small-cap brokerage, now building his own firm from scratch with a deliberately small client base. The conversation peeled back layers most traders never think about.
Three things that should change how you evaluate your broker:
Commissions are the distraction. The real costs are locate fees, short interest, and margin interest. Brandon was blunt: brokers make more on those than on commissions. If you’re not modeling total trading cost, your backtest is lying to you.
Smart routing isn’t free — you’re paying with fill quality. IB’s smart route skips exchange fees by crossing internally or routing for payment for order flow. You save on the ticket, you leak on the spread. Scalpers and API traders should care. Swing traders probably don’t need to.
The PDT rule dying could dilute your broker’s service. More accounts means thinner locate pools, longer hold times, and less attention per client. Brandon’s response: cap the client count and refuse $5K short sellers entirely.
Action plan: pull your broker’s 606 report. Compare locate costs across two brokers on the same ticker, same day. If the spread surprises you, you’ve found hidden drag on your edge.
For backtested systems that account for real execution costs, visit www.statsedgetrading.com.