Slippage and Fees
Composer now includes estimated trading costs in symphony backtests. These costs include regulatory fees and slippage.
The US Securities & Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) charge regulatory fees on sales (i.e., selling a stock or an ETF). Composer does not benefit from these fees, and all proceeds go directly to the SEC and FINRA.
From our brokerage partner, Alpaca:
- SEC: $5.10 per $1,000,000 of principal (sells only) - this fee is rounded up to the nearest penny on each fill or partial-fill.
- FINRA Trading Activity Fee (TAF): $.000119 per share (sells only) - this fee is rounded up to the nearest penny on each fill or partial fill and will be no greater than $5.95.
In addition, trading costs include slippage, which captures the difference between hypothetical trades in the backtest and actual trades that incur spreads and experience price movement. Market conditions, liquidity, and bid-ask spreads can impact the amount of slippage.
Users can better understand how a live-trade symphony may perform by adding estimated trading costs to the backtest. Further, investors can customize slippage estimates to test symphony performance in times of market stress or evaluate the robustness of symphony performance.