4 ms·
From Levine: "Payment for order flow sort of created the zero-commission retail-brokerage model, but it’s not really necessary anymore. You can run a profitabl
by svggrfgovgf 4y ago
From Levine:
"Payment for order flow sort of created the zero-commission retail-brokerage model, but it’s not really necessary anymore. You can run a profitable retail brokerage on net interest margin, without charging for trades at all."
So what everyone should be complaining about is not PFOF, but "net interest margin". In other words everyone should be complaining about the brokers not paying enough interest on the cash balances in the brokerage accounts.
- LatteLazy 4y agoThis confused me at least: do people keep cash in their brokerage accounts? Is this an American thing (limey Brit here). I transfer cash in once I've decided to trade and the brokerage usually holds it for a max of a day or two until the trade actually executes (say I am buying an index fund where orders today are executed tomorrow). The only time there has been cash for longer than that was when I know I needed it (a week or two before buying my first place) so I didn't want to risk a stock market crash etc.
- JumpCrisscross 4y ago> do people keep cash in their brokerage accounts? Some people use a brokerage account as a checking account. Most don’t. Interest can also be earned on lent securities.
- tacostakohashi 4y agoIn the US, settlement is T+2, so if you are buying, the broker doesn't pay the cash/receive the shares until two days later, but they won't let you buy without cash in your account first, so cash for unsettled trades is a bunch of float.
- IMSAI8080 4y agoI am keeping some cash in my Vanguard account because it's offering a better interest rate than my cash ISA.
- mrep 4y agoSounds like you should use a better brokerage. Vanguard defaults to putting all my money in Vanguard Federal Money Market Fund (Settlement fund) with a current 7-day SEC yield of 3.8%. They do charge me a 0.11% fee though.