Commission Models: Per-Lot, Per-Side, Spread-Only

The short answer

Commission is a stated fee per trade or per lot, charged on top of the spread. A broker advertising zero commission has moved that cost into a wider spread rather than removed it, so the only comparable figure is spread and commission added together for the size you actually trade.

Commission is the one part of trading cost that behaves like an ordinary price. It is stated as a number, before you trade, in a unit you can multiply. That makes it the easiest component to compare — and, perversely, the one most used to make expensive accounts look cheap.

The three models

Spread-only. No separate fee. The broker quotes a wider spread than it could and keeps the difference. Usually marketed as "commission-free" or "zero commission", both of which are literally true.

Raw spread plus commission. The broker passes on a spread close to what it sees and charges a stated fee. The spread looks dramatically tighter. The fee is the rest of the cost.

Per-side versus per-round-turn. A fee may be quoted for opening and again for closing, or as a single figure covering both. These differ by a factor of two, and the number is often presented without saying which it is. If a fee is quoted without the word "round turn" or "per side", that is the first thing to establish.

Why neither number means anything alone

Picture two accounts. One quotes a wide spread and no fee. The other quotes a narrow spread and charges a fee. On the marketing page, the second looks enormously cheaper — the spread figure might be a fifth of the first one's.

Add both halves and they can land in the same place. They can also land some distance apart, in either direction. The point is that you cannot tell from either number by itself, and the number each broker chooses to lead with is the one that flatters it.

The only comparable figure is spread plus commission, for the trade size you actually place. That last clause matters, because the two components scale differently. A spread cost scales with position size smoothly. A commission may be per lot, or flat per order, or tiered — and a flat fee is proportionally brutal on a small position and negligible on a large one.

So the same two accounts can swap places depending on who is asking. A trader placing large, infrequent positions and a trader placing small, frequent ones should genuinely choose differently, and neither is being fooled.

Doing the arithmetic properly

The method is unglamorous and it is the whole job:

1. Take the spread each account quotes for the instrument you actually trade, at the hour you actually trade it — not the headline figure, which is typically a minimum observed under good conditions.
2. Convert it to the same unit as the commission, for your position size.
3. Add the commission, doubled if it is per side and you intend to close the position.
4. Multiply by how many trades you place in a month.

The fourth step is the one people skip, and it is where the difference stops being academic. A gap that is trivial on one trade is the difference between two accounts over four hundred.

We are not going to put example numbers here. Any figures we invented would be wrong for your instrument, your size, your broker and your hour, and a worked example with made-up inputs is a very effective way to make an unreliable conclusion feel solid.

What commission is not

Commission is not a measure of service quality, and a higher fee does not imply better execution. It is also not the same thing as the cost of getting filled — slippage and spread widening sit outside it entirely and are not reduced by paying more.

It is also worth separating commission from the regulatory obligation around execution. Under MiFID II, firms must take all sufficient steps to obtain the best possible result for clients, and for retail clients that result is assessed on total consideration: the price together with the costs associated with execution. In other words the rule itself treats price and cost as one object. That is a duty on the firm about how it executes; it is not a promise that any particular firm's fees are competitive, and it should not be read as one.

The honest thing about commission

For all that, commission deserves some credit. Of everything on this site's ledger, it is the component most clearly disclosed in advance, in a figure you can take away and multiply.

The spread is quoted as a typical value that will not hold at every hour. Financing is a rate applied daily to a position whose size you may change. Slippage is not quotable at all. Commission is a number, stated up front, that means what it says.

Which is why it is strange that the most common way to choose an account is to find the one that doesn't mention it.

Where this sits

Commission is the most clearly disclosed part of what a trade actually costs. Whether it is the term that matters for you depends on how you trade.