To my knowledge - brokers have following revenue stream apart from commission/per trade fees. 1.- Just float income itself is quite substantial - most clients don't know that brokers have huge sum of idle money of their clients - so indirectly they themselves are banks - hold client's idle money (not invested yet) and they don't give any interest to clients or give pennies - for example last I checked major broker was paying 0.20% PER ANNUM on this idle money. The same brokers charge like 10% or up - when they lend money to clients in terms of margin. 2. Brokers get volume discount and exchange rebates. 3. They get payment of order flow. 4. Mark up on borrow fees, possibly mark up on data Am I missing any possible revenue stream? Sometimes I wonder - why brokers want money for everything - data/commissions - Why so much greed in the name of capitalism ?
I was discussing about revenue stream - if am missing anything Do you know how much major brokers make just in float income? On quick google search - I found this - Schwab - Net income for 2023 was $5.1 billion, IBKR - Interactive Brokers annual net income/loss for 2023 was $2.812B, I can not find correct numbers for Fidelity but I believe it is at least $2B
Does it matter? Retail brokers get paid for directed order flow. Some margin interest income. Some float. No big deal. Since commissions disappeared due to competitive pressure, they make a lot less. But, with advent of the internet and the EASE of transactions, volume is much greater. The ax makes money. Assume an average spread, in cents, between his bid and ask. Now multiply that by the volume. He pockets that spread on each and every fill (before his overhead). DAILY. That's his dynamic trading inventory posture. There's also a core posture, as agent, in theory, to maintain a fair and orderly market. That inventory rises or falls in value. The direction hinges upon his book of open orders. He's going to milk it for all worth. Rise a stock as high as he can get it in conjunction with competition of all other instruments. He can change his core inventory value (up or down) with a simple gap open. Generally requires some news fluff. Once he longer has the demand, long term.......... short. That long term posture is NOT the same as his trading shorts to replenish inventory (which he will eventually distribute). Akin to an elevator operator. Day in day out perpetually. As long as the stock is listed. Why are you dwelling on retail brokers? What's there to gain?
I'm just now getting started in a hobby side business, and it's amazing how much supplies cost, and how much time it takes to do everything! Way more stuff involved than designing and making the product.
Did you read everything I said - guess you did not here it is again On quick google search - I found this - Schwab - Net income for 2023 was $5.1 billion, IBKR - Interactive Brokers annual net income/loss for 2023 was $2.812B, I can not find correct numbers for Fidelity but I believe it is at least $2B