After this weekend, U.S. government fees on securities sales will quadruple.
Don’t panic. The charges are small. Very small.
For decades, the Securities and Exchange Commission has secured some funding for its regulatory activities from trading fees paid by brokers and exchanges. The rates of these SEC fees are adjusted periodically, as national trading volumes rise and fall. On Saturday, May 14, the fee jumped from $5.10 to $22.90 per million dollars of securities sold.
Put another way, that amounts to 2.3 cents per $1,000 of a securities sale. That wouldn’t change most traders’ plans. The rate is recalculated every year, or sometimes semiannually, and has varied over the years from one cent to four cents per $1,000 of securities sold. Trading volumes were robust in 2021, so the agency only needed a fee of $5.10 per million bucks traded. Volumes have thinned this year.
Under Section 31 of the Exchange Act, the SEC actually collects the fees from national exchanges and from the brokers’ self-regulatory organization, the Financial Industry Regulatory Authority.
Brokers, in turn, typically recoup the Section 31 fee from their retail customers; you’ll probably find the charges on your trading confirmations, even from brokers who are charging no commission.
Similar fees are levied on some options and futures trades, as well as new issues, stock repurchases, and proxy solicitations. Other countries also levy these user taxes on securities trades. The fees apply only to the sale of stocks, not purchases. For options, that means it applies to grantor of an option and to the exerciser of a put or call assignee.
Brokers vary in how much of these taxes they pass on to customers. Robinhood Markets (ticker: HOOD), for example, passes the fee on to customers, except for sales with a notional value of $500 or less.
Interactive Brokers Group
(IBKR) charges it to customers for the sale of stocks and options—but not single-stock futures.
Write to Bill Alpert at [email protected]