In investing and real estate, “no commission” means the broker or agent is not charging you a direct per-transaction fee to place a trade or handle a deal. It does not mean the transaction is free. Firms still earn money, and you still pay, through channels that are less visible than the flat per-trade fee that used to appear on every confirmation.
The Specific Fee That Disappeared
For years, online brokerages charged a flat dollar amount every time you placed a trade, commonly $4.95 to $9.95 per order. That is the fee “no commission” refers to. When a broker advertises commission-free trading on stocks or ETFs, they mean you pay nothing directly to them for the act of executing that order.
Everything else about the cost of investing is still in play: the price your order actually fills at, fees baked into the products you buy, government and self-regulatory charges on certain transactions, and the tax bill that follows from how often you trade. Because commission-free platforms make trading feel costless, they tend to encourage more of it, which is where the quieter costs start to matter.
What You Still Pay When You Trade
The Bid-Ask Spread
Every security has a bid (what buyers will pay) and an ask (what sellers will accept). The gap between them is a real cost on every trade, commission or not. When your order is routed through a wholesale market maker rather than to a public exchange, your fill price may sit slightly off the midpoint. One trade in a heavily traded stock, the difference is trivial. Across hundreds of trades a year, it adds up.
Spreads widen sharply for less liquid instruments. Thinly traded stocks, options, and cryptocurrencies on commission-free platforms can carry spreads of 1% or more, which exceeds what a traditional per-trade commission would have cost.
Regulatory and Operational Charges
Certain fees are unavoidable even on a commission-free platform:
- The SEC Section 31 fee, a government charge applied to securities sales. The rate is $0.00 per million dollars of covered sales through April 3, 2026, and rises to $20.60 per million starting April 4, 2026. Brokers typically pass this through on sell orders.1U.S. Securities and Exchange Commission. Section 31 Transaction Fee Rate Advisory for Fiscal Year 20262U.S. Securities and Exchange Commission. Section 31 Fees – Basic Information for Firms
- The FINRA Trading Activity Fee, currently $0.000195 per share sold (capped at $9.79 per trade) for equities and $0.00329 per options contract, which brokers often pass along.3FINRA. Fee Adjustment Schedule
- Wire transfer fees, typically $15 to $30.
- Account transfer fees when you move your account to another firm through ACATS, often $50 to $125.
- Account maintenance charges at some brokers for paper statements, inactivity, or low balances.
Fees Built Into the Product
The trade may be free, but the investment can carry ongoing costs. Many mutual funds charge 12b-1 fees, annual charges taken from fund assets to cover marketing and shareholder servicing, capped at 1% per year (no more than 0.75% for distribution and 0.25% for servicing).4Investor.gov. Mutual Fund and ETF Fees and Expenses – Investor Bulletin A fund labeled “no-load” can still carry 12b-1 fees and other operating expenses.
Mutual funds may also charge redemption fees when you sell within a short holding period, often 30 to 90 days, and some carry back-end sales loads that trigger when you sell before a set number of years.4Investor.gov. Mutual Fund and ETF Fees and Expenses – Investor Bulletin These are disclosed in the fund’s prospectus fee table. ETFs generally do not charge 12b-1 fees, which is part of why they’ve become the default holding on commission-free platforms.
How Commission-Free Brokers Actually Make Money
Understanding the revenue side explains where the hidden costs come from.
Payment for order flow. When you place a trade, the broker often routes your order to a wholesale market maker rather than sending it directly to an exchange. The market maker pays the broker a small amount, often fractions of a cent per share, for the right to fill that order. The practice is legal in the United States but has been banned or is being phased out in the European Union, Canada, and the United Kingdom.5U.S. Securities and Exchange Commission. How Does Payment for Order Flow Influence Markets Under SEC Rule 606, brokers must publish quarterly reports showing where orders were routed and what they were paid, and you can request your broker’s report.6U.S. Securities and Exchange Commission. Responses to Frequently Asked Questions Concerning Rule 606 of Regulation NMS Rule 605 requires market centers and brokers to publish monthly execution quality data, which lets you compare fill quality across firms.7Federal Register. Disclosure of Order Execution Information
Interest on uninvested cash. Cash you leave sitting in your account is typically swept into interest-bearing accounts or money market funds, and the broker keeps a portion of that interest. When rates are high, this can be a firm’s single largest revenue source. Some brokers offer a paid subscription tier, often around $5 a month, that shares a higher rate with you. The default sweep rate is usually well below what you could earn on your own.
Securities lending. If you hold stocks in a margin account, the broker can lend those shares to other traders, typically short-sellers, and collect a daily fee. Some firms also run fully paid lending programs that lend shares held in cash accounts; the SEC has warned brokers to make sure those programs meet customer protection rules.8U.S. Securities and Exchange Commission. Staff Statement on Fully Paid Lending You may see a small share of the lending revenue; the broker keeps most of it.
Tax Costs Commission-Free Trading Can Trigger
Wash Sales
Sell a security at a loss and buy the same or a substantially identical security within 30 days before or after the sale, and the IRS disallows the loss for that tax year. The 61-day window (30 days before, the sale day, 30 days after) applies across all your accounts, including IRAs and your spouse’s accounts. Frictionless selling and repurchasing on commission-free platforms makes these violations much easier to stumble into.
A disallowed loss is not gone forever. It gets added to the cost basis of the replacement shares, which lowers your taxable gain when you sell those shares later. But you lose the deduction for the current year.
Forced Sales of Fractional Shares
Commission-free platforms popularized fractional shares, but fractional positions generally cannot transfer between brokerages through ACATS. When you move your account, the sending broker liquidates the fractional pieces and sends cash.9U.S. Securities and Exchange Commission. No-Action Letter – Financial Information Forum That is a taxable event, and it can generate a gain or loss you did not plan for.
What “No Commission” Means in Real Estate
Real estate commissions are negotiated percentages of a home’s sale price paid to the agents involved. Historically, the seller paid a total commission averaging around 5% to 6% of the sale price, split between the listing agent and the buyer’s agent, with each side receiving roughly 2.5% to 3%. Recent data puts the total closer to 5.4%. Under that structure, a buyer’s agent could describe their service as “no commission to you” because the seller’s side was covering it.
That framing became harder to use after August 17, 2024, when new rules from the National Association of Realtors settlement took effect. Offers of compensation between agents are no longer permitted on MLS platforms, so a buyer can no longer assume the seller will cover their agent’s fee.10National Association of REALTORS. What the NAR Settlement Means for Home Buyers and Sellers
Any agent working with a buyer must now sign a written agreement with that buyer before touring homes, including live virtual tours. The agreement has to state a specific, objective compensation amount (a dollar figure, flat fee, percentage, or hourly rate) rather than an open-ended arrangement, and it must disclose that commissions are fully negotiable and not set by law.11National Association of REALTORS. Written Buyer Agreements 101 Sellers can still offer concessions to buyers through the MLS, such as contributing toward closing costs, but they cannot advertise direct compensation to the buyer’s agent there.
In practice, a buyer today negotiates the agent’s fee upfront and may end up paying it directly if the seller does not agree to cover it in the deal. “No commission” on the buyer’s side is no longer something you can take for granted.