Forget about the average commission of 6 cents per share.
The typical institutional investor paid weighted average commissions of 4.1 cents per share in the first quarter of 2005 for trades on the Big Board and expects commissions to drop to 3.9 cents per share over the next year, according to a new report by Greenwich Associates. That's down from 4.5 cents in the first quarter of 2004. Large institutional investors, which generate more than $50 million in annual commissions on trades on the New York Stock Exchange, currently pay a weighted average of 3.9 cents per share and expect to pay only 3.7 cents per share over the coming year.
Commissions for trades on the Nasdaq stock exchange have also fallen, to a weighted average of 3.9 cents per share in the first quarter from 4.2 cents in 2004. Hedge funds paid the lowest commissions for trades on the Nasdaq in 2004, a weighted average of 3.7 cents.
"Equity commission rates have been on a path of steady decline since deregulation, and that trend continues due to the growing popularity of self-directed electronic trading alternatives and program trading," said Jay Bennett, a Greenwich consultant, in a statement.