> margin on trading is quickly becoming negative

Both institutional [1] and retail [2] trading are is still profitable. Even for smaller shops. That said, the business has economies of scale. It thus becomes more profitable the larger one is.

[1] https://www.ft.com/content/d7ab03c2-0939-4665-aa72-a2b922da7...

[2] https://www.forbes.com/sites/jeffkauflin/2020/08/03/robinhoo...

It's also worth remembering that some of these outfits--certainly including Etrade--became popular largely because they were offering $7 or so trades at a time when the traditional brokers might have been charging more than $50.

By contrast today, if you use, say, Fidelity for other purposes like company stock plans, there's not a lot of reason to use Etrade for personal trading given that most trades are free on both platforms.

MS isn’t a significant lender really so I don’t see that happening (they don’t get deposits like a Citi or JPM). Not sure how they could make that switch. That’s a huge cultural change no? Now, they do do some relationship lending in small amount to investment banking clients off their own balance sheet... that is small relatively speaking though.

I just got a mortgage from them, and they do have their Cash Plus banking product.

It was actually a super smooth process better than when I bought my last house with Chase. If they don’t do more mortgages they should, the experience was excellent.

O really? Morgan Stanley has mortgaged they originate and sell directly to individuals?

I’m learning new things

Nope. They want more data - especially trading data. It's why charles schwab is offering free trades. Apparently they believe the data generated is more valuable than charging $4 per trade.

> MS needs more assets if they want to start lending.

No they don't, they have nearly a trillion in assets. And if they wanted more assets, they would buy up local or regional banks.

Just like tech companies started buying other companies for their "IP", now the trend is towards data. Whether it is to train their algorithms, to package and sell or whatever.

> they believe the data generated is more valuable than charging $4 per trade

They're selling the order flow [1]. Just like Robinhood. This isn't a data play in a tech-company acquisition sense.

[1] https://en.wikipedia.org/wiki/Payment_for_order_flow

I'd be very surprised if Schwab started selling order flow. One reason why the old guys prefer Schwab/TD to robinhood (and paid the commission) was because of more consistent fills because Schwab wasn't selling order flow

> I'd be very surprised if Schwab started selling order flow

All the discount brokers sell order flow. When I was an options trader over a decade ago, we bought Schwab flow.

Professional trading platforms like IB tend to be more execution oriented.

Schwab and TD Ameritrade already sell their order flow, which shouldn’t be surprising in the least if you pay attention to stock and option trading.

Also, having your order sold to Citadel doesn’t mean you’ll get a worse fill.. Citadel still has to respect NBBO prices for fills

> having your order sold to Citadel doesn’t mean you’ll get a worse fill.. Citadel still has to respect NBBO prices for fills

Lots of orders fill better than NBBO in dark pools. That’s how Citadel et al make money. That said, the slippage doesn’t really matter for small cheque sizes—it’s too small to matter.

Even with Schwab, I get tons of fills less than NBBO. Maybe not as much or as good as IB, but you're still getting price improvements a lot of the time.

They have to report the exact fraction of orders they sell, to whom, and for how much, so no need to speculate: https://content.schwab.com/drupal_dependencies/psr/606/2020-...

TL;DR: they primarily sell to Citadel and Virtu.

and in other times, you can make money off of the float. Especially if you’re geared towards individuals making lots of short-term trades.

> It's why charles schwab is offering free trades

CS is offering free trades because IBKR offered free trades. There was a cascade effect in the industry last year wherein IBKR announced free trades, and within two months the entire industry also started offering free trades.

We'd need to figure out why IBKR made that change. If you read the announcements, it sounds like it was just so they could get more lending (margin trading), options, shorting, etc fees.

https://www.fool.com/investing/2019/10/01/interactive-broker...

I'm not sure if IBKR lite allows you to control order flow, so there might be some profit there too. I'd guess that's a major distinction between IBKR-pro and IBKR-lite.

> We'd need to figure out why IBKR made that change

Robinhood.

Seems unlikely? Does robinhood really cater towards IBKR's original userbase?

Some. Since trader can have multiple accounts. So, some in IBKR, some in ToS and some in RH. It's not binary. Maybe you put all your meme stock gambling in RH for example

Charles Schwab started offering free trades because their competitors all started offering free trades. There was a "fee war" a year or two ago where each brokerage lowered their fees in response to others lowering theirs.

https://apnews.com/article/534da63064b54ccdbcbb68434677ff54