Minimum Commission

A minimum commission is a floor applied to the fee on a trade: below a certain size, the percentage or per-lot calculation is replaced by a fixed charge. It exists because handling a very small order costs a broker roughly what handling a large one does, and it is common on share CFDs and on accounts priced as a proportion of notional. Its effect falls almost entirely on small accounts. Above the threshold the commission behaves as advertised; below it, cost per unit of exposure rises as size falls, so a micro position can pay several times the effective rate of a standard one. Traders who scale into positions in small increments meet the floor on every clip, and a strategy backtested at full size will understate its own costs badly when run small. Where a minimum applies, the practical responses are to size trades so the calculated commission clears it, or to use an account type priced per lot without one.