If Stock Trading Is Free, How Does Your Broker Make Money?
Sarah puts $10,000 into a brokerage account.
She buys $10,000 of stock.
She looks at the trade confirmation.
Commission: $0
The broker provided the app.
It handled the order.
It keeps Sarah's account running.
And Sarah paid nothing for the trade.
So how does the broker make money?
The answer is that a stock trade is only one small part of the relationship between a broker and its customer.
Start With the $0 Trade
For a long time, the business looked easier to understand.
You wanted to buy a stock.
Your broker charged you a commission.
You paid $10.
The broker made $10.
Today, many online stock trades in the United States come with a much more attractive number:
$0
But zero commission doesn't mean nobody gets paid.
To understand why, follow Sarah's order.
She presses:
Buy
Her broker has to send that order somewhere to be executed.
One possible destination is a company called a market maker.
A market maker stands ready to buy and sell securities and helps trades happen.
Some market makers pay brokers for sending customer orders to them.
Only after understanding that do we need the name for it:
Payment for Order Flow.
Or PFOF.
The SEC describes it as compensation that exchanges or market makers may pay broker-dealers for routing customer orders to them.
So Sarah can see:
Commission: $0
while another company in the financial system may still be paying her broker for the order flow.
That doesn't mean the market maker simply handed Sarah's missing commission to the broker.
And it doesn't automatically mean Sarah received a bad trade.
How orders are routed and how well they are executed are separate questions.
The simpler point is:
A $0 commission doesn't mean the order has no economic value.
Now Leave $3,000 Sitting in the Account
Let's change the example.
Sarah deposits $10,000.
This time she buys only $7,000 of stock.
She leaves:
$3,000 in cash.
Sarah may think the interesting part of her account is the $7,000 she invested.
To a financial company, the cash can matter too.
Brokers can earn interest-related revenue from customer cash and other interest-earning assets.
They can also earn interest from margin loans, where customers borrow money to invest.
This isn't a small side business.
Look at Charles Schwab.
In 2025, Schwab generated about:
$23.9 billion in total net revenue.
Its trading revenue was about:
$3.9 billion.
But its net interest revenue was about $11.8 billion.
That was roughly 49% of Schwab's total net revenue.
Think about that for a moment.
People think of Schwab as a place to invest and trade.
Yet in 2025, the company made far more net revenue from interest than from trading.
Suddenly the business looks different.
The broker doesn't need every click of the Buy button to produce a commission.
The whole account can have value.
Robinhood Shows Another Version of the Same Idea
Robinhood became famous for commission-free trading.
So it is a useful company to follow.
In the second quarter of 2026, Robinhood reported a record $1.31 billion in net revenue.
About $776 million came from transaction-based revenue.
Another $389 million came from net interest revenue.
And $143 million came from other revenue, including growing subscription revenue from Robinhood Gold.
That already tells us something important.
Robinhood isn't making money in only one place.
A customer can trade.
A customer can hold cash.
A customer can borrow.
A customer can subscribe to a paid service.
A customer can use other financial products.
By June 2026, Robinhood had 4.8 million Gold subscribers.
The company also said it had reached 13 separate business lines generating at least $100 million in annualized revenue each.
The company that became famous for making one financial service free has spent years building other ways to make money from the customer relationship.
The Customer Is More Valuable Than One Trade
Imagine Sarah stays with the same broker for ten years.
During those ten years she might:
buy stocks,
sell stocks,
hold cash,
trade options,
borrow on margin,
pay for a subscription,
use managed investing,
or use other banking and financial services.
Now the economics become easier to understand.
The broker doesn't necessarily need to ask:
"How much can we charge Sarah every time she buys Apple?"
It can ask a much bigger question:
"How valuable is Sarah's financial relationship with us over many years?"
That is a very different business.
Schwab Makes This Especially Clear
Go back to Schwab's 2025 numbers.
Its roughly $23.9 billion of net revenue included:
$11.75 billion — net interest revenue
$6.51 billion — asset management and administration fees
$3.92 billion — trading revenue
$977 million — bank deposit account fees
plus other revenue.
And even the trading number isn't simply customers paying old-fashioned stock commissions.
Schwab reported about $1.93 billion of order-flow revenue within its 2025 trading revenue.
The brokerage business has become a collection of businesses sitting behind one account.
Trading is one of them.
Cash is another.
Lending is another.
Asset management is another.
So Why Make Trading Free?
Because free can be a very powerful front door.
Imagine two stores.
Store A charges you $10 just to walk through the door.
Store B lets you walk in for free.
If Store B can make money from everything that happens after you enter, it doesn't need the door itself to be profitable.
Commission-free trading can work in a similar way.
A broker can make the first action cheap or free because getting the customer inside the financial system can be more valuable than charging for that first action.
That's why focusing only on the price of a stock trade can hide the larger business.
$0 Is a Price, Not a Business Model
There is nothing magical about zero.
A company still needs revenue.
It still needs to pay employees.
It still needs technology.
It still needs regulatory and compliance systems.
It still needs to make a return on the business.
The interesting question is not:
"How can a company survive while giving everything away?"
Because it isn't giving everything away.
The better question is:
"Which part of the relationship is free, and which parts make money?"
For modern brokers, the answer can include order flow, interest, lending, asset management, subscriptions and other financial services.
Different brokers use different mixes.
Robinhood and Schwab are not identical businesses.
But both demonstrate the same larger idea.
The Trade Is Only the Front Door
Go back to Sarah.
She deposited:
$10,000
She bought a stock.
She paid:
$0 commission.
Nothing about that statement is necessarily misleading.
The trade really can cost her zero in commission.
But Sarah is now more than a single trade.
She is an account.
She may have cash.
She may trade again.
She may borrow.
She may subscribe.
She may use another financial product.
And she may remain with the company for years.
That's why the apparent contradiction disappears.
The trade can be free because the relationship isn't.
When you see $0, you're seeing the price of one action.
You're not seeing the economics of the entire customer.
BEYOND THE OBVIOUS.
Sources
SEC Investor.gov — Payment for Order Flow