Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

> Maybe give these guys a break?

why should anyone "give them a break"? Aint running a charity here - if they provide sufficient value for the risk, then they will get customers without having them to "give breaks".

PAYMENT-FOR-ORDER-FLOW IS GOOD FOR YOU. There, I said it. [Source: I have 10 years of HFT / market making experience]

PFOF is misunderstood, as others pointed out here. However, it's not a 'win win win'; it's more like a 'win win lose'. This is something even media gets wrong all the time. I've only seen this mentioned as a footnote in Matt Levine.

[Note: I don't know if Double is doing it, or if they plan to - this is just a general summary].

So:

* Win: Citadel (etc.) make money by trading against order flow that's more benign than the resting orders in public exchanges.

* Win: The client gets a better execution price than the publicly displayed bid/ask. Back when I started (20+ years ago, yes, I'm old) this was 1/100 of a penny, the legal minimum (due to minimum tick print size). But recently, the market orders in my personal account have been getting price improvement of almost half the spread.

Things are a bit different in some options exchanges, where retail flow gets some priority, regardless of when you joined a given price point at the order book queue. But almost all equity exchanges use price-time priority, you're almost guaranteed adverse selection.

Example for those who may need it: if you place a buy limit @ $1.07 in a 1.07 (bid) - 1.08 (ask) market. Then, the bids at 1.07 slowly disappear, because firms such as "Shark Holdings, LLC" (the trading firm consisting solely of quants with unpronounceable foreign-sounding names) will cancel their bids if they sense the market is going down, e.g. if they observe a lot of trades at the bid. Then, the new market will be 1.06-1.07, and you will have sold at the ask.

OK, so here's who loses: any large orders that have to trade in the open markets (not 'dark pools', ATS, etc.) will be stuck with more 'toxic' orders, and get worse execution. The question is: do I gain more as an individual from having my (quasi-entertainment-value, usually small) personal account orders get better execution? or do I lose more by having my indirect trading (possibly an index fund that I hold my retirement money in) get worse execution? I think it's the latter. But nobody connects the dots and/or seems to care. [Of course, this is more complicated, because large institutional orders aren't 100% on behalf of small investors.]

You may say this component of market structure is stupid/wrong/suboptimal. I personally think so. But this is the reality of it. It's encased in rules. There was some attempt to get rid of PFOF a couple of years ago, but it failed. So that's not going away.

So this is a win-win-lose: it's globally suboptimal, but for the 2 first 'wins', it's locally optimal.

Summary: although PFOF has bad optics and stimulates pitchfork-y instincts ("big bad evil companies are out to gitcha", etc.), if your broker doesn't do it, you're both leaving money on the table - and guess what, they'd have to charge you some other way.

We can ACAT in existing positions to an Index yes, which would be "seeding" an index with shares you already own.

As for taxes, we provide a yearly summary for realized gains and losses that most tax professional can plug into their software.

And for TLH, yes for larger portfolios (above 20 tickers) we create a factor model of the portfolio using 4 factors - Momentum, Value, Quality and Min Volatility. When a stock is identified for TLH purposes, we will sell it and try and bring your overall portfolios factor exposure back in line. This provides for a much more flexible and robust way to do tax loss harvesting because not every stock has a relevant pair (for example a stock that just recently merged with another business might have no clear comparables)

For a large, highly liquid ETF like SPY, it’s easy to rapidly unwind a position at a very tight spread. How does Double’s approach—directly holding the individual underlying securities—compare in terms of market liquidity and transaction costs, especially if I need to quickly liquidate my portfolio or adjust my positions?

The account is opened in your name and your securities are held in your name at Apex Clearing. Apex has more than 19M brokerage accounts opened.

We are Registered Investment Advisor (RIA) regulated by the SEC.