Some brokerage customers aren’t happy that Robinhood and its rivals sell their orders. Even if regulators ban that practice, there are other ways no-commission brokerages can make money from your trades.
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Why Free Trading Will Never Be Free
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This isn’t an easy way to make money. It is regulatorily complex to run a trading desk, and it can consume a lot of capital. But it was a significant revenue generator. Autonomous Research analyst Christian Bolu has noted that E*Trade’s revenue-per-trade was roughly 40% lower after it sold its market-making unit. Likewise, based on what Interactive Brokers historically generated in typical revenue as a market maker, Robinhood could in theory have generated even more on its volume than what it does today, according to analyst Steven Chubak of Wolfe Research.
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