they could make money by giving less than optimal executions.
rather than charging commission, you might pay 40.01 for a
share of stock rather than 40.00 . interactive brokers has
a variable commission charge and some trades I pay almost
no commission and even got a commission credit. this usually occurs
with stocks or options where there is a big difference between the ask and bid.
instead of making their money from the trade from my commission,
they are probably making money from the market maker or a
rebate from the floor/electronic trader. rest assured no broker
will be giving an investor free trades without the ability to earn
something somewhere else.
think of a bank giving you a free checking account. they can make
money other ways by using your money interest free, selling
you other financial products, or by having fees for certain
types of events in your account (like overdraft fees for example).
same thing for no fee rebate credit cards. the vendor or those
that carry balances are paying for your free card.
rather than charging commission, you might pay 40.01 for a
share of stock rather than 40.00 . interactive brokers has
a variable commission charge and some trades I pay almost
no commission and even got a commission credit. this usually occurs
with stocks or options where there is a big difference between the ask and bid.
instead of making their money from the trade from my commission,
they are probably making money from the market maker or a
rebate from the floor/electronic trader. rest assured no broker
will be giving an investor free trades without the ability to earn
something somewhere else.
think of a bank giving you a free checking account. they can make
money other ways by using your money interest free, selling
you other financial products, or by having fees for certain
types of events in your account (like overdraft fees for example).
same thing for no fee rebate credit cards. the vendor or those
that carry balances are paying for your free card.
