Trade Commissions, Subscription Fees, and Regulatory (SEC/TAF) Fees

Phase 3 - Orders

Overview

Common Charges for Services Include:

  • Trade commissions: Self-Directed (Non-Discretionary) trading models

  • Assets under management (AUM) fees: Discretionary trading models

  • Subscriptions: used for all trading model variants

Trade commission

Every time a customer enters a trade, a commission can be assessed to generate revenue. DriveWealth has the ability to maintain a simple commission structure so that fee's are automatically taken each time a customer trades. It is based on the size (quantity) of the trade being placed.

Below are a few examples of different use cases (not limited to) Drivewealth can facilitate:

  1. Use case: Commission charge of $0.025/share with a minimum of $1 per trade DW can setup the account to reflect the same.
    In the above case,
    (i) If an order is placed for 10 shares - commissions charged will be $1
    (ii) If an order is placed for 100 shares - commissions charged will be $2.50

  2. Use case : Commission charge of $1 per trade for a trade size of less than 30 quantity and charge $1 plus $0.030/share if quantity exceeds 30 shares
    In the above case,
    (i) If an order is placed for 10 shares - commissions charged will be $1
    (ii) If an order is placed for 100 shares - commissions charged will be $1.21 ($1 + 70*0.03)

Commissions can be applied at a Global level to all customer accounts or can be also assigned at a Customer Account level. If the Partner's use case is to have multiple commission structures for different users (for instance, based on a subscription model, etc.), Drivewealth will be able to create all the commission structures and provide the partner with the corresponding commissionID list. The commissionID can then be applied to the customer accounts by using the Assign Commission Schedule endpoint. If applying commissions on a Global level, there is no need to use this endpoint as the default commissionID will get applied to all customer accounts.

๐Ÿšง

Custom Commissions

For use cases where the Partner does not want to charge "Quantity" based commissions, Drivewealth also offers the ability to input a custom commission as part of every trade being placed.
In this case, the Partner will be responsible for real-time calculation of commissions right before a trade is placed and will have to include the commission key/value pair as part of the Create Order request.

Note: DriveWealth does not have the ability to calculate custom commissions for Partial fills. Customers will be charged full commission fee in case of Partial fills on an order for which a Custom commission was passed.

Assets under management (AUM)

For Partners implementing a Discretionary trading model, fees can be charged based on the Assets Under Management (AUM). Drivewealth provides the ability to deduct the fees from the customer's brokerage account albeit the calculations for the consequent AUM fees have to be determined by the Partner.
Once the fees to be deducted is calculated, you can utilize our Create Redemptions endpoint to deduct the fees into a Fees Collection Account established at DriveWealth under the Partner's name. Partner will have complete visibility into this Fee Collection Account.

PS: Although you will be utilizing the Redemptions Endpoint, the construct of the request body is slightly different from the usual. (see below)

  • {
    "accountNo":"DWGC000003", //Client Account
    "amount":5,
    "currency":"USD",
    "type":"CASH_TRANSFER",
    "transactionCode":"FEE_AUM",
    "details":{
    "partnerAccountNo":"DWUU000006" //Fee Collection Account
    }
    }

For fee deductions from the Customer account, our system first checks for the Cash Reserve on the Customer Account. If there is enough Cash reserve, fees is deducted directly from the reserve. Else, our system will sell securities to cover for the difference (Fees minus Cash reserve) across the entire portfolio of the customer based on the already established weights within the portfolio.

๐Ÿ“˜

Charging Different AUM % based commissions

For a Partner's use case where they would like to charge different AUM Percentages for different sets of customers, Drivewealth provides the ability to segregate the customers based on productID. DW's Reconciliations API creates separate reconciliation reports per productID. Once customers are segregated, the AUM fees can be charged similarly as described above.

Useful Links:

  1. For more information on how to assign productID to customer accounts, please refer: Create Account
  2. Refer Reconciliation to view the Reconciliations API.

Subscriptions

โ—๏ธ

US-based Partners only

DriveWealth supports Subscription fee deductions for US Based Partners ONLY. For non-US Partners, the Partner is expected to work with 3rd party Payment Gateway Services to charge Subscription fees.

A periodic subscription fees can be charged to a customer in order to use our Partner's Trading Application. While keeping the trading aspect commission free(or not), our Partners usually charge subscription fees in order to cover for the account opening/maintenance fees or in general to generate revenue. A few other use cases being, having a tiered subscription model where customers on lower tiers get access to limited parts of the application while customers on high subscription tiers receive the complete experience. Drivewealth enables our partners to be able to charge this fee and hold it on behalf of the Partner and remit on a pre-decided schedule usually on a monthly/quarterly basis.

The Partner has to provide DriveWealth with the use case of the subscription fees being charged. DriveWealth will setup the subscription schedule accordingly and provide the Partner with the corresponding planID. If the requirement is to have multiple subscription tiers, DriveWealth will set up all the subscriptions tiers and every tier will have a planID associated with it which will be provided to the Partner. So for instance, if you have 3 tiers of subscriptions, there will be 3 different planID each corresponding to a tier.

Setting up subscriptions

  1. If not already established, create bankAccountID using Create Bank Account. The response of the request should have the bankAccountID.
  2. Then, assign the appropriate planID to the customer accounts using Create Subscription. The response will be the subscriptionID for that particular account.
  3. In order to view the subscription assigned to a user use the Get User Subscriptions endpoint. This will show you the currently active and past inactive subscriptions for the account.
  4. To remove subscriptions from an account, use the Remove Subscription endpoint.

๐Ÿšง

Changing Subscriptions

To replace existing subscription with new subscription for an account, first use the DELETE SUBSCRIPTION endpoint to remove existing subscription then use the CREATE SUBSCRIPTION endpoint to assign the new subscription to the account.

๐Ÿ“˜

Subscriptions FAQs

1. Is there a way to have a free subscription period?
A: Yes, the planned free subscription period needs to be communicated to Drivewealth and we'll setup the system accordingly.
2. When does a subscription fee get charged and how are the charge cycles defined?
A: The first subscription fee is charged as soon as the subscription is applied (or in technical terms a Create subscription request is sent) on the user's account. Thereafter, the user is charged for subscription fees on a periodic basis starting from the day the subscription was applied. For instance, for a monthly subscription applied on an account on the 20th of a month, will get charged a second time on the 20th of next month.
3. Is the subscription charge cycle same for all users?
A: Subscriptions are charged on the user level and not on a global level, so it depends when the customer was first charged a subscription fee then they fall into the cycle. For instance, if user1 is charged a subscription fee on the 20th and user2 is charged on the 15th, user1 will keep getting charged every month on the 20th while user2 will be charged on the 15th every month.
4.. What if the user changes bank account details between 2 subscription charges?
A: If the user deletes their bank account details, have the user add in the new bank account details, create the new corresponding bankAccountID and further create a new subscription. The subscriptionID still remains the same and the subscription is restored with the new details. The user will still be only charged during his payment cycle.
5. Is there a way to cancel a subscription completely and refund the customer on a pro-rata basis?
A:
DriveWealth does not support this out of the box, the Partner will have to do the calculations and rebate the customer if this is a requirement.
6. What happens when a Subscription payment gets returned?
A:
DriveWealth auto cancels the subscription, it is recommended that the Partner resurfaces the info of the bank account and asks the customer to confirm before reinitiating the subscription. Also, the Partner gets charged a ACH return fee.

SEC / TAF Fees

  • As a part of standard brokerage operations the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) impose fees for the SELLING of securities

The Organizations

The mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC strives to promote a market environment that is worthy of the public's trust.

FINRA is authorized by Congress to protect Americaโ€™s investors by making sure the broker-dealer industry operates fairly and honestly. FINRA oversees more than 624,000 brokers across the countryโ€”and analyze billions of daily market events

SEC Fee

The Securities and Exchange Commission - beginning on February 25, 2021, the fee rates applicable to most securities transactions will be set at:

  • $5.10 per million dollars or
  • Per-dollar of securities sold is $0.0000051

TAF Fee

The trading activity fee (TAF) is one of the regulatory fees FINRA assesses to recover the costs of supervising and regulating firms. This includes costs associated with performing examinations, financial monitoring, and FINRAโ€™s policy, rule-making, interpretive and enforcement activities.

  • The minimum TAF fee a customer will be charged is $0.01 per sale
  • For trades of less than 50,000 shares, firm pays $0.000119 per share
  • For trades of 50,000 shares or greater, firm pays $5.95 per trade

Further Information may be found here:

https://www.sec.gov/news/press-release/2021-8

https://www.finra.org/rules-guidance/guidance/trading-activity-fee