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By now most mainstream trading platforms are free. Five years ago, offering low-cost trades helped a service stand out. You could accept the wrong fit on a platform in exchange for a free trade. Today no-commission trading is a standard pitch offered by even the full-featured platforms.

This has left Lightspeed somewhat behind in the retail market. Despite advertising itself as “low cost stock and options trading.” Lightspeed still charges trading commissions. At the same time it offers a set of highly specific tools that can benefit extremely active (read: fast) traders. Between the two, you have a system which is only particularly useful to traders who want to make high-volume, high-speed transactions, and which charges for each of these (ideally numerous) trades.

If you are a professional trader making some real money off of this system, it may work well for you. The benefits of Lightspeed’s tools may outweigh the costs of using it. For a retail investor, you will probably do better to look elsewhere. Here’s an overview of the platform.

Services & Features: What Does Lightspeed Offer?

On its website Lightspeed calls itself “the home of professional traders,” and it is honest in its branding. This is a trading platform designed for professionals. Ordinary investors will find little to love here. Inexperienced investors, indeed anyone but sophisticated and high-skill investors, will find its interface confusing and its tools unhelpful. Unless you make serious money as a day trader, you’ll get more for your money elsewhere.

But professionals might find this service worthwhile. We’ll put it to you this way: One of the features that Lightspeed offers is the ability to pick your own trading venue based on the market currently offering you the best prices. It also includes a customizable search tool called Lightscan, so that you can look for assets not just by name and industry but by a range of technical indicators. If you would like to search for assets by trading volume or volatility, you can do so.

If those tools seem like they might meaningfully change your trading game, Lightspeed might be worth your while.

Lightspeed offers two main trading platforms. It’s core brand is its desktop platform, Lightspeed Trader, which is complemented by its web platform called Lightspeed Web Trader. Both offer largely comparable products, although with mildly different interfaces.

This service is geared toward high-volume traders, and as a result orients its tools around that market. You will find no fundamental analysis here, and not even many of the large sheets of market-oriented technical data. While Lightspeed is built around technical trading, it is an asset-oriented product. You must look up the stocks or options you’d like to invest in and then pull up any specific information you would like. (Even within specific assets, however, investors should expect somewhat less information than they could find in a competing product like E*TRADE.)

Perhaps the most important feature that Lightspeed offers is the titular speed of its transactions. Investors can select the markets through which they would like to send their trades, and the platform itself routes those orders directly to the market. This skips the third party brokers who typically process trading platform orders, allowing Lightspeed to process orders faster than competing platforms. This difference is measured on a scale of seconds, and more often fractions of a second. For ordinary investors this wouldn’t matter. For professional day traders, on the other hand, it can mean real money.

Lightspeed reflects its identity in the assets it offers. You cannot buy most long-term products on this service. Lightspeed offers trading in stocks, ETFs, options and futures. Futures contracts require you to use a separate trading tool than Lightspeed’s ordinary platform, and the service does offer Treasury bills through broker-assisted trades. There are no mutual funds or bonds here.

However, by contrast, Lightspeed also offers a wide variety of account types, including personal, corporate and several types of retirement accounts. If you would like to day trade with your 401(k), on Lightspeed you can.

Pricing: How Much Does Lightspeed Cost?

Bright starry lights in outer spaceDespite advertising itself as low-cost, Lightspeed has not joined the zero commission trend shared by most (if not all) major trading platforms. In fact, Lightspeed’s pricing model reflects the complexity and sophistication that defines the rest of its platform. First, depending on which market you choose for any given trade, Lightspeed may charge a routing fee attached to each trade. These are small, typically less than $0.01 per share, and vary widely by market and order type. You can see a full list of Lightspeed’s routing fees here.

For stocks and ETFs Lightspeed charges a standard commission of either $4.50 per trade or $0.0045 per share, with a $1.00 minimum. It charges $0.60 per options contract traded, once again with a $1.00 minimum. A futures contract will typically cost $1.29 to trade.

The service does offer significant volume discounts. Like routing prices, volume discounts can vary widely. For example, for its most active traders Lightspeed will cut stock commissions as low as $2.50 per trade or $0.0010 per share. Those prices are reserved for investors who trade more than 15 million shares per month.

Lightspeed also has several account minimums. On its web platform, Lightspeed Web Trader, you must maintain at least $10,000 in a standard account or $2,000 in an individual retirement account (IRA). Through its desktop platform, Lightspeed Trader, you must maintain a $25,000 minimum in a standard account or $10,000 in an IRA. Accounts with less than $15,000 must pay at least $25 in monthly commissions.

Effectiveness: How Well Does Lightspeed Work?

The effectiveness of Lightspeed depends almost entirely on how highly you prize nanosecond, data-rich trading.

For almost all traders, this product offers very little. The average trader will take no value from selecting the specific market in which to trade their stocks. (In fact, the average trader probably won’t know what that feature even does.) Nor will almost anyone gain value from executing their trades 0.1 second faster than a competing product.

Some of Lightspeed’s features are interesting, most notably the depth of its search tools. The ability to research assets by a range of technical data is useful and would be welcome in other platforms. However, they’re buried under an interface that wouldn’t be out of place in an investment bank and balanced out by all of the fundamental analysis and asset classes that this service is missing. In exchange for this technical complexity and limited utility, you will pay far more in commissions and minimum balances than on competing, more full-featured services.

And that’s okay.

Lightspeed is not built for the beginning or even average investor. In the same way that a multimeter shouldn’t make sense to someone just trying to find the right lightbulb, Lightspeed doesn’t need to make sense to someone just trying to set up their 401(k).

This service is built for professional investors and specifically for high-speed, high-activity investors who will take advantage of its customizable data and its direct access to the markets. Lightspeed is a trading platform built for someone to whom the tiniest fraction of a second matters. If you are a day trader or a professional investor, then give this service a look. If not then this is almost certainly the wrong choice for your financial needs.

The Bottom Line

Digital candlestick chartLightspeed is a product built for financial professionals. Day traders and other highly specific investors might find enormous value in its specific set of products. Trades on Lightspeed are executed with extreme rapidity. For the average investor, however, it will not offer what you need. In addition to its complexity, it’s not a particularly inexpensive service. Further, you can’t trade mutual funds or bonds on this platform.

Tips on Investing

  • Lightspeed might not be the right trading product for you (or maybe it is), but sound financial advice almost certainly is. Finding a top-notch financial advisor doesn’t have to be hard. With SmartAsset’s matching tool you can find a financial professional in your area, in minutes, who can help you scope out the marketplace and figure out the tools and strategies to make your own moves, and make them stick. If you’re ready, get started now.
  • With many choices of online trading platforms to choose from it’s important to be able to make apples-to-apples comparisons between various options. An online brokerage comparison tool will help you find the one that best meets your investing style and budget.

Photo credit: ©iStock.com/Artem Peretiatko, ©iStock.com/krung99, ©iStock.com/enot-poloskun

 

Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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