A U.S. stock or exchange-traded fund trade can show a $0 commission and still produce revenue for the broker.
That revenue usually comes from order routing, idle cash, margin loans, share lending, or a subscription.
U.S. brokerage accounts are the focus here. The United Kingdom and the European Union limit routing payments more tightly than the United States does.
At a glance: the main revenue streams
Commission-free brokers typically collect revenue in five places, and the mix differs by firm.
- Order routing payments. A trading venue can pay the broker for customer orders it receives.
- Interest on cash. The broker can earn more on idle cash than it credits to the account.
- Margin lending. Borrowed buying power produces interest, and that interest also prices credit risk.
- Securities lending. Fees from lending customer shares can be split with the account holder.
- Subscriptions. Market data, tools, or account features can be sold as a monthly plan.
A $0 commission leaves these other lines in place.
What “commission-free” usually means
“Commission-free” usually means no separate per-trade commission on certain products, often U.S. listed stocks and exchange-traded funds.
The trade can still cost money through the bid-ask spread and through slippage.
Order types describe how that order becomes a fill.
The missing charge is the commission line, not every cost of the trade.
How order routing can produce revenue
Many retail stock orders go to a wholesale market maker or another venue instead of a public exchange.
That venue may pay the broker for the order. The payment is payment for order flow.
Rule 606 of Regulation NMS is a Securities and Exchange Commission rule on order routing.
It requires a quarterly public report on non-directed orders in National Market System stocks and listed options.
The report is due within one month after the quarter ends, and it stays posted for three years.
It includes net payment for order flow by order type for the main venues.
Fidelity Brokerage Services disclosed these payments in its Q2 2026 Rule 606 report.
The report covers equity orders sent to wholesale market makers, including Citadel Securities and Virtu Americas.
For those market makers, the payment on marketable equity orders is $0.0008 per share or less.
The payment on non-marketable equity orders is $0.003 per share or less.
A 100-share marketable order at that cap pays the broker $0.08.
The report states that the payment is not a condition for sending more orders to a market maker. That statement is the firm’s own disclosure.
FINRA Rule 5310 still requires reasonable diligence so the customer’s price is as favorable as possible under prevailing market conditions.
FINRA Regulatory Notice 21-23 says a routing payment must not interfere with that duty.
The notice also says the payment is not a plus when the firm scores market quality.
Robinhood’s 2025 annual report shows the size of this line at one commission-free firm.
For the year ended December 31, 2025, Robinhood reported $302 million of equities transaction-based revenue and $1.123 billion of options transaction-based revenue.
Those figures sit inside $2.628 billion of total transaction-based revenue, which also includes cryptocurrency.
A fraction of a cent per share can support a $0 commission when order volume is large.
How interest on customer cash becomes broker income
Idle cash in a brokerage account can be swept to a bank or held in short-term instruments.
If the broker earns more on that cash than it pays the customer, the difference is revenue. Firms often call the difference net interest.
Charles Schwab’s 2025 Form 10-K describes uninvested client cash as the main funding source for its interest-earning assets.
For the year ended December 31, 2025, Schwab reported $11.75 billion of net interest revenue.
Order flow revenue was $1.93 billion. Total net revenue was $23.921 billion.
In the same year, Robinhood reported $229 million of cash-sweep interest and $319 million of interest on segregated cash and deposits.
The cash spread tends to widen when rates are higher and idle balances are larger.
How margin lending and leverage add revenue
Margin lending charges interest when a customer borrows against the account to buy more securities.
Federal Reserve Regulation T sets initial margin on a margin equity security at 50 percent of current market value.
If the venue sets a higher percentage, that higher figure applies.
The regulation does not stop a broker from setting a higher house margin.
The rate charged sits above the broker’s own funding cost. That gap is revenue on the loan.
Robinhood reported $573 million of margin interest revenue for 2025.
A sharp drop in price can force a sale of securities to repay the loan.
How securities lending can monetize customer portfolios
Some brokers lend shares in customer accounts to traders who need to borrow stock, including for short sales.
The borrower pays a fee. Program terms decide how much of that fee reaches the customer.
Robinhood’s securities-lending interest revenue was $604 million in 2025. Interest expense was $414 million. The net amount was $190 million.
Robinhood Stock Lending pays the customer up to 15 percent of the gross revenue from lending that customer’s shares.
Robinhood states that loaned shares generally fall outside SIPC protection.
It also states that it aims to hold cash collateral of at least 100 percent of loaned value at a third-party bank.
The published split leaves the firm with the rest of that gross revenue. The firm also handles recalls and collateral.
How subscriptions and add-ons fit into the model
Some commission-free brokers charge a monthly fee for data, research, or a bundled account tier.
Robinhood reported $179 million of Gold subscription revenue for 2025.
Robinhood Gold is a membership fee, not a per-trade commission.
Practical implications for how costs show up
A $0 commission moves the visible cost into the execution price, the cash yield, or the margin rate.
SEC Rules 605 and 606 require public reports on execution quality and on order routing, including payments.
A routing payment of a fraction of a cent shows up in those reports. A fixed commission would have appeared on the trade confirmation instead.
Fees and costs maps other places a price can hide a charge.
Tradeoffs, risks, and limitations
Routing revenue, cash spreads, margin, and share lending each add a cost or a conflict that a $0 commission does not show.
- Routing payments. The payment can pull orders toward venues that pay the broker. FINRA says that payment may not be counted when the firm judges market quality.
- Cash yield. Each firm sets the rate it credits against the rate it earns on idle cash.
- Margin. The loan adds an interest bill and can trigger a forced sale if equity falls.
- Share lending. The customer’s fee share, the collateral, and SIPC treatment depend on the program agreement.
- Account mix. The size of each line depends on activity, the products traded, and the country’s rules.
Regional and regulatory differences
Payment for order flow is allowed in the United States with disclosure. It is prohibited for many clients in the European Union, and U.K. supervisors have treated it as incompatible with their conflicts rules.
Robinhood’s 2025 filing still reports transaction-based revenue, and it lists new regulation or a ban on payment for order flow as a risk factor.
MiFIR Article 39a bars an investment firm from receiving payment for order flow for retail clients.
The same bar covers a defined set of professional clients.
Venue rebates that go entirely to the client are outside that ban. A member state that already allowed the practice could exempt its firms until 30 June 2026, and only for clients in that member state.
In the United Kingdom, the Financial Conduct Authority’s 2019 review treated the practice as incompatible with its conflicts and inducements rules.
The finding covered retail and professional client business.
A U.S. model that uses routing payments does not carry over unchanged into those regimes.
Common questions
Is commission-free trading actually free?
The commission on the confirmation can be $0. Fidelity’s Q2 2026 routing report still listed equity payments of $0.0008 per share or less on marketable orders. The spread, the cash yield, and margin interest can remain.
Do all commission-free brokers use payment for order flow?
No. Schwab’s 2025 order flow revenue was $1.93 billion, and its net interest revenue was $11.75 billion. Another firm can rely more on subscriptions or share lending, and the mix can differ for stocks and for options.
Why do spreads matter when the commission is zero?
The bid-ask spread is paid in the execution price. In a thin market that gap can be many cents a share. A routing payment in the Q2 2026 Fidelity report was a fraction of a cent.
