About the Video
In this video, I will break down the business model of zero commission brokers (such as TD Ameritrade, eToro, Webull, Trading212 and etc.) and explain to you why you are actually paying MORE with them!
🔴 𝗦𝘁𝗮𝗿𝘁 𝗜𝗻𝘃𝗲𝘀𝘁𝗶𝗻𝗴 𝘄𝗶𝘁𝗵 𝗜𝗕𝗞𝗥 ➡️ https://www.interactivebrokers.com/mk...
⬇️ Timestamps:
0:00 Intro
0:53 How it all started
2:37 How do brokers make money?
4:52 Other ways to gain profit
6:13 Conclusion (Takeaway)
The commission war may have resulted in free trades on many brokers. But it does come with a price. It forced these brokers to pull other revenue levers behind the scenes that most retail traders and investors are unaware of. Commission-free stock trading evolved from a market niche dominated by Robinhood to a mainstream feature in just a few years. At the same time, adding premium and fee-based features made Robinhood more like the other brokers.
Brokers make money through fees and commissions charged to perform every action on their platform such as placing a trade. Other brokers make money by marking up the prices of the assets they allow you to trade or by betting against traders in order to keep their losses.
Payment for Order Flow (PFOF) is a primary way that brokerages make money from commission-free trades. Payments for order flow may result in lower quality order execution, leading to slightly higher buy prices and marginally lower sell prices.
Even small delays in executing market orders can generate self-serving opportunities to adversely impact quality and build profits for the brokerage. They offer few frills and attract frequent customer service complaints, which are expected because ultrathin margins generate a natural conflict of interest between customer needs and the company’s profitability.
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Disclaimer: This content is provided by a paid Influencer of Interactive Brokers. Influencer is not employed by, partnered with, or otherwise affiliated with Interactive Brokers in any additional fashion. This content represents the opinions of Influencer, which are not necessarily shared by Interactive Brokers. The experiences of the Influencer may not be representative of other customers, and nothing within this content is a guarantee of future performance or success.
None of the information contained herein constitutes a recommendation, promotion, offer, or solicitation of an offer by Interactive Brokers to buy, sell or hold any security, financial product or instrument or to engage in any specific investment strategy. Investment involves risks. Investors should obtain their own independent financial advice and understand the risks associated with investment products and services before making investment decisions. Risk disclosure statements can be found on the Interactive Brokers website.
Interactive Brokers is a FINRA registered broker and SIPC member, as well as a National Futures Association registered Futures Commission Merchant. Interactive Brokers provides execution and clearing services to its customers. For more information regarding Interactive Brokers or any Interactive Brokers products or services referred to in this video, please visit www.interactivebrokers.com.
