Stock Trades were meant to be free?

E*trade has joined Charles Schwab and TD Ameritrade in eliminating trading fees on retail stock trades  (and other financial products).   The dirty little secret is that $5 per trade fee was never the reason your online brokerage loves you.

The real profits are in earning a portion of the “spread”, the difference between the price to buy a stock and what you receive when you sell the stock back.  Retail brokers have long participated in “payment for order flow”, where a wholesale trading firm earns the spread and gives a portion of the income to the retail firm.   The business practice was an innovation created by Bernie Madoff, one time head of NASD, which decides the rules for trading in cooperation with the SEC

https://www.bloomberg.com/quicktake/payment-for-order-flow

 

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4 Responses to Stock Trades were meant to be free?

  1. RebelSansClue says:

    Well, at least I'll be saving *some* money when I make yet another losing options trade.

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