Rebate Trading

Jun 17, 2011

Written by:
Al Hill

✓ Reviewed by Kunal Vakil, Co-Founder of TradingSim · Updated Mar 31, 2026

Rebate Trading Definition

Rebate Trading is the act of buying or selling short a stock directly from an Electronic Communications Network (ECN) and receiving a rebate from the ECN for the transaction. Rebate trading is mostly used by day trading as the transaction can list for seconds. The rebate trader hopes to make money off the rebate provided by the ECN, instead of attempting to make money solely on the price movement of the stock. The rebate trader must first look for a stock that trades with high volume. This ensures the day trader will be able to purchase or sell short a large number of stock without moving the price. The rebate trader receives a rebate for buying from the ECN, on the order of $2.5 per thousand shares purchased. Once the trader is up on their position, even by a cent or two, the trader will close out the trade, and take the small profits from the stock, as well as the rebate from the ECN. Most ECNs require that day traders maintain a minimum amount of trading activity in order to trade on their network. Unlike retail brokers, ECNs will also negotiate their rebate rates on a case-by-case basis instead of flat rates.

Tags:

About the Author

Al Hill

Co-Founder & CEO, TradingSim

Alton Hill is the Co-Founder of TradingSim with over 18 years of trading experience. He completed the Design Thinking Bootcamp at Stanford’s D.School and brings expertise in Product Development to create the best trading simulation experience. His strategy focuses on trend-following systems, targeting high-volatility stocks with strong primary trends using the 15-minute chart.

View all posts by Al Hill →

Related Blogs

Does Max Pain Factor into Day Trading?

In the world of finance and investing, theories are often one of the most widely debated topics. Among a number of such theories, the concept or the theory of Option Pain, also known as Max Pain or...

Coin Collecting Resource

The study of coins, and the collecting of coins, is as old as money itself. Some people collect coins for their elegance, beauty, creativity, or rarity, while others collect misprints, ancient coins,...

The Definition of a Successful Day Trader

What a loaded question? Many traders just close their eyes and begin imagining all of the fancy Bugattis they will be buying with all their new found wealth, kudos to you for at least taking the time...