eru 4 hours ago

Low cost brokerages mostly earn money from the interest rate differential, ie what they pay from your un-invested balances vs what interest they pay you.

They also earn some money from 'payment for order flow'.

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matwood 3 days ago

AUM, managing high wealth clients, running their own funds with expense ratios (also some of the lowest in the industry), uninvested cash, etc... Retail trading is commoditized now.

Anyone who really cares about spreads will be using limit orders. Otherwise you're talking about pennies on highly liquid shares.

The fact that we're even discussing the possible spread differences between market makers shows just how commoditized retail trading has become.

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thefreeman 3 days ago

the sell order flow to market makers who gobble up the other side of bad retail trades

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  • xen0 2 days ago

    I highly doubt market makers are in the business of betting against retail traders.

    I suspect they're in the business of collecting the spread on lots of small trades that they can assume are largely random.

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    • kortilla 2 days ago

      What you described is how you bet against retail traders. The bet is that they have no edge so it’s safe to run tight spreads and nice pure market making algos that assume random behavior at volume.

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      • xen0 2 days ago

        Feels weird to call it a 'bet against' when the other side can (potentially) benefit from the tighter spread you offer.

        But yes, the market maker doesn't run the risk of trading with someone with knowledge and a lot of capital to apply it.

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        • kortilla 6 hours ago

          Yeah, I don’t like the phrase either, but market making in these pools is quite literally taking the other side of their trades.

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  • graemep 3 days ago

    Which means that your cost is market maker's spreads instead of fees. Still a cost to you.

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    • kortilla 2 days ago

      Nope, this is one of the counterintuitive things about people paying RH for order flow. Market makers can offer tighter spreads when they know it’s a pool of dumb money.

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      • graemep 2 days ago

        tighter spreads are not zero spreads

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