Alpaca is a commission-free trading platform that offers API-driven investing for both retail and institutional traders. Designed with algorithmic trading in mind, it provides access to U.S. equities, real-time market data, and fractional shares without requiring a minimum deposit. The platform is popular among developers and traders seeking automation tools, with features that support backtesting and paper trading.

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As a brokerage service, Alpaca handles the transactions between the buyer of a security with the seller. For example, say you place an order to buy a NYSE-listed stock. No matter how you place this order, it eventually is sent to a broker. This broker would go and purchase the stock from the New York Stock Exchange, which is itself a type of middleman called a “clearing house” that organizes all of the sellers and buyers in the marketplace. Then the broker would bring your stocks back and place them in your portfolio.

Today, brokers act as buyers and sellers, but also as financial gatekeepers. One of the major reasons they have not been swept aside in favor of direct access to a stock market is that the regulatory system depends on brokers to maintain ethical trading standards and guard against predatory financial products.

Services and Features: What Does It Offer?

So what does Alpaca itself offer? As a brokerage, it focuses on exchange-traded products. This means that it buys and sells stocks and exchange-traded funds (ETF) on behalf of investors, as well as American Depositary Receipts (ADRs) and securities traded over the counter (OTC).

Alpaca is known for its API-first trading infrastructure, allowing users to automate their investment strategies with ease. Its API suite includes features for placing orders, managing portfolios, and accessing market data, making it a strong choice for developers and quantitative traders.

Beyond its trading capabilities, Alpaca supports paper trading, allowing users to test strategies in a risk-free environment using simulated funds. This feature is especially useful for algorithmic traders refining their models before deploying them in live markets. Fractional share trading is another key offering, making it possible to invest in expensive stocks with smaller amounts of capital.

For advanced users, Alpaca offers brokerage-as-a-service, allowing fintech companies to integrate stock trading functionality into their applications.

Fees: How Much Does Alpaca Cost?

There are usually four types of fees to look out for when choosing a trading platform. You should look out for these when evaluating any investment or trading service:

• Trading fees. Any fixed charge attached to each trade that you make. This can come in the form of a flat fee or what’s known as the “spread.” This is when your broker charges you based on the difference, if any, between the buying and the selling price of an asset.
• Trading commissions. This is when a broker will charge you a percentage based on the volume or value of each trade.
• Inactivity fees. Any fees that the broker charges you for not trading, such as for keeping money in a brokerage account.
• Non-trading/Other fees. Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account, taking money out of it or signing up for additional services.

Alpaca offers no-fee trading, meaning that it does not charge investors when they make a trade. Instead, the company makes its money primarily by charging interest on uninvested balances and payment for order flow.

This does not mean that trading with Alpaca is necessarily free. Third-party platforms may add additional fees and commissions on top of Alpaca’s zero-commission model. This will depend entirely on the individual company operating that trading platform.

Further, there are margin fees. Alpaca applies a minimum initial margin requirement of 50% for marginable securities and 100% for non-marginable securities per Regulation T of the Federal Reserve Board.

Alpaca Securities Brokerage Fee Schedule

Effectiveness: How Well Does Alpaca Work?

Alpaca is well-regarded as a brokerage. Its trades are timely and efficient with relatively little “drift,” meaning that the price at which you place your order is generally the price at which the transaction goes through. This is a well regarded firm from a transactional end.

It does have some weaknesses, however. Alpaca does not offer trading in foreign exchange, futures or international markets. If those are the primary types of trading activities that you’re interested in, you may want to look elsewhere.

What Is an API?

Besides being a brokerage, Alpaca offers an API. That’s a toolkit that developers use to build software. It creates a series of protocols and standards that allow multiple different computer systems to talk to each other.

For example, an API might allow two different software applications to share data, or it might allow an application to run on a specific piece of hardware. When an email client fetches mail from your Gmail account, it uses an API to communicate between the third-party inbox software and Google’s servers. When your weather app tells you the temperature, it uses an API to communicate with the National Weather Service’s servers and another to communicate with the hardware on your phone.

Instead of releasing its own trading platform, then, Alpaca has released a sophisticated API which allows third parties to build their own trading platforms. Using this toolkit, those third parties can then build their trading platforms to communicate with Alpaca’s servers.

The result is that Alpaca can act as the stand-in for any number of fintech companies that want to invent a better way to trade but don’t want to handle the financial aspect. Those firms can design their software, interfaces and trading algorithms, and Alpaca will handle the actual financial transactions. In fact, Alpaca has specifically designed its API toolkit around algorithmic and AI trading. As far as this company is concerned, bring on the bots.

Bottom Line

Alpaca stands out as a commission-free brokerage built for algorithmic traders, developers, and fintech firms looking to integrate stock trading into their platforms. Its API-driven infrastructure allows users to automate trades, access real-time market data and implement custom investment strategies. The platform’s support for fractional shares and paper trading makes it accessible to both experienced traders and those testing automated strategies.

Tips on Investing

• Consider working with a financial advisor if you’re interested in investing but don’t know where to start. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Whether you’re considering getting started with investing or you’re already a seasoned investor, an investment calculator can help you figure out how to meet your goals. It can show you how your initial investment, frequency of contributions, time horizon and risk tolerance can all affect how your money grows.

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