Estimated Trading Costs in Backtests
When backtesting symphonies that trade stocks, ETFs, and crypto on Composer, these models include estimated trading costs that are broken down into Composer’s Trading Pass, regulatory fees, and slippage.
Trading Pass
Investing in symphonies that trade stocks or ETFs requires a Composer Trading Pass.
- Monthly Plan: The simulation incorporates a $30 monthly fee for Composer’s Trading Pass. It’s important to note that Composer also offers an annual plan at $288, which gives you a 20% discount. This annual option is not included in the backtest model.
- Per User, Not Per Symphony: The Trading Pass is charged per user rather than per symphony. If you invest in multiple symphonies, the effective fee per symphony is significantly lower than what is modeled.
Regulatory Fees
These mandatory fees are collected on sales of securities and are forwarded directly to regulatory bodies–the US Securities & Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), not retained by Composer:
- SEC Fee: Charged at $27.80 per $1,000,000 of principal sold, rounded up to the nearest penny per transaction.
- FINRA Trading Activity Fee (TAF): $00.000166 per share sold, rounded up to the nearest penny per transaction, with a maximum of $8.30 per transaction.
Crypto Spread Markup
Composer charges a transparent fee for crypto trades: a spread markup of 20 bps (basis points) on either side of a trade. This spread markup is shared between Composer Crypto LLC and our trade execution partner, Alpaca Crypto LLC.
Slippage
Slippage reflects the potential cost difference between hypothetical trades in your backtest and actual trades that might encounter price movement and spread. The amount of slippage is influenced by market conditions, liquidity, and bid-ask spreads.
- Default Setting: The default slippage setting in backtests is 1 basis points (bps), which can be adjusted to model different market conditions.
- Customizing Slippage Estimates: Adjust the slippage settings to simulate how your symphony might perform in varying market scenarios, such as during high volatility. This helps evaluate the robustness of your symphony under different market stresses.
Incorporating these estimated costs into your backtests gives you a clearer view of potential live-trade scenarios of your symphonies, enabling you to make more informed decisions when investing with Composer.