The fees are baked into quoted price ("the spread") but the execution cannot be worst than the NBBO (National Best Bid Offer).
They are making money on the spread for sure, probably crossing some trades internally as well. They also make money on the margin rates.
You don't think it's at all strange that 80% of share volume coming out of Robinhood is sold off to broker-dealers attached to large systematic hedge funds?
I'm sure you could think of a thing or two to do with terabytes of retail trade logs and behavioral advertising data.
The rule is that at the time of the execution, the execution cannot be worse than the NBBO.
I'm dont work at a broker dealer anymore, i'm a retail investor. I think where we are is awesome. Ten years ago, these trades cost $7 to $20 ($1 for iB) + spread.
Twenty years ago, they cost $10 to $50 + spread.
Twenty five years ago they cost $35+ + spread.
These numbers are not even inflation adjusted. In think where we are is awesome and a big win for customers.
I'm just saying that systematic hedge funds make directional bets and hold positions overnight. These activities move the midpoint.
That is a hidden cost not visible in spreads or commissions. The SEC can't even measure that cost, only the intermediaries themselves can.
The main reason why 90% lose money is costs. That is it. Most people probably are optimised for losing money but the main issue is really costs/overtrading.
But related to this, most people believe that edge on profitable trades is very large...but in most markets, institutional-grade costs will still be a big chunk of your edge i.e. costs matter hugely.