Have you looked at your trade transaction history recently? You might want to look.
On April 17th, the SEC put out a press release that I missed: “SEC Issues Second Fee Rate Advisory for Fiscal Year 2024.” At a glance, the title seems innocent. There is no mention of an increase or anything, until you read it or read the attached order.
For those not familiar, when you sell a stock, the SEC charges you a tax. This is not your commission, but a fee to the regulator. Before the increase, this fee was $8 per one million. They have now raised it to a whopping $27.80 per one million.
A hypothetical example of how this fee works is as follows:
Buy: 1500 shares * $8.27 per share = $12,405
Sell: 1500 shares * $8.28 per share = $12,420
Total transaction value: $12,405 + $12,420 = $24,825
You now need to calculate the fee based on the new rate of $27.80 per million dollars in transactions (the old rate was $8).
The total transaction value is $24,825, which is less than $1,000,000 so we need to adjust it to be per million dollars $24,825 / $1,000,000 = 0.024825.
Multiply this by the new fee rate: 0.024825 * $27.80 = $0.689.
As you can see, this can get expensive quickly. The more shares you trade or the more expensive the stock, the worse this fee will be. With trading commissions at most big-box retail brokers now $0 and the recent implementation of T+1 settlement this month, the timing of this increase from April is interesting to say the least. I find it funny that there was a lot of media hype about T+1 and many financial media “journalists” wrote about it because it’s easy to understand. I haven’t seen a single journalist write about this tax increase that wasn’t a regurgitation of the press release.
Inside the attached order, the SEC has provided a graph showing the total dollar value subjected to this tax. As you can see, I am sure regulators are upset that they have missed out by not increasing the fee sooner. Either way, a near 3x increase without a single announcement from any of the big brokers about how this fee can affect their customers tells you that they prefer you not knowing.
