How some broker make revenue without collecting commission?

Most "free" brokers live on payment for order flow. The market makers paying the broker in turn live of the bid-ask-spread. In the end, you are paying the bid-ask-spread, so free really needs to be in quotes.

Your savings, as an investor, are not always "invested." So the brokers "lock" your uninvested money and put it in a brokerage subsidiary or reinvest it on its own terms on cash sweep accounts. However, the broker pays you some interest in return, of course.

In this way, you will, at least, gain some money interest then let your account sit still. Here's how they benefit: At present, Charles Schwab pays less than 0.1% of interest rates on cash sweeping accounts and invests it at about 2.5%, which pockets the gaps.

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These firms no longer charge fees, but they don't earn revenue from the stock transactions. Notice that on various brokers, payment for the order flow can vary. Basically, such brokers receive payments to deliver buy and sell orders to their clients to algorithmic trading companies. These computerized trading companies align customers with their own selling orders.

No commission brokers like Fidelity, Schwab, Vanguard, etc. make billions of dollars per year from investors. They make money from:

• Net interest income

• Mutual fund and ETF service fees

• Advice solutions

• Sale of annuities

• Payment for order flow

• Managed money