attempted but ultimately failed to transition into this new era of zero-commission trading. One notable exception is Charles Schwab, who turned to PFOF to dramatically boost its brokerage revenue in 2020 to $621 million– a 350% increase over what the firm earned in 2018 or 2019. That said, there is no such thing as a free lunch, or trade, and investors are just now finding this out when it comes to PFOF.
I first spoke to eToro CEO Yoni Assia in 2011 when his firm was then a fast-evolving, tech-heavy brokerage firm with little regulatory oversight and a focus on gamification of investing and “copy trading” of leveraged products. Assia summarizes: “We internalize that flow in an algorithmic, real time, market making basis” and adds “We are giving pure stock spread and no commission stock trading.” As retail trading of both the crypto and traditional variety exploded during the pandemic, additional scrutiny has fallen on the business models of companies like Robinhood and eToro, when it comes to the fine print that comes with commission-free or low-cost trading.
Moving money around faster. Today the capital investors use to buy stocks, or futures, or crypto is segregated and requires investors to liquidate investments and convert to US dollars or other fiat currency before sending that capital from one broker to another – a process that is tedious, costs money, and takes days.
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