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A broker is a firm that takes your order to a market you cannot enter yourself. A broker also opens an account and holds assets for you, and lends you money on margin to buy more than you have. US law separates brokers from dealers: a broker trades for the account of others, and a dealer trades for its own account. The US securities regulator SEC calls the two roles acting as an agent and acting as a principal, and a firm that does both is a broker-dealer. For you, the difference lies in which side of the order the firm is on: a broker acting as an agent only passes the order along, while a dealer trades with its own capital and so can be the other side of the order.

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What kind of broker is yours?

The word broker covers several kinds of firm. All of them take your orders, but which side of the order they stand on and how they hold your money depends on the market.
A US stock broker is a broker-dealer registered with the SEC. Most brokers and dealers must join a self-regulatory organization (SRO), usually FINRA, and every registered broker-dealer must be a SIPC member. Rule 15c3-3 requires a broker to hold or control its clients’ fully paid securities and to keep a separate reserve account at a bank for the benefit of clients.When a member broker fails, SIPC (a nonprofit created by the US Congress) restores the securities and cash in clients’ accounts, up to 500,000 USD, of which up to 250,000 USD in cash. SIPC does not cover losses from a fall in the price of securities.

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Where does your order go after you press the button?

You buy 100 shares of a company in the S&P 500 through Fidelity and press the button. If you do not choose where the order trades, the broker does, and Rule 606 requires US brokers to publish each quarter where they sent their clients’ orders. These reports are XML files, such as Fidelity’s and Robinhood’s, so code can read them. The chart below comes from Fidelity’s Q2 2026 report, counting S&P 500 stock orders in April 2026. That month, nearly two thirds of Fidelity’s S&P 500 orders (64.72%) went to six wholesalers, firms that specialize in taking retail orders and filling them themselves. Three exchanges received 16.30%, and 14.29% went to CrossStream, Fidelity’s own alternative trading system (ATS). Each broker splits differently: the article Market participants shows that in the same month five wholesalers received 95.18% of Robinhood clients’ S&P 500 orders, and explains who wholesalers are. Choosing where to send orders also involves money: the firm that fills the order may pay the broker to receive its clients’ orders, and US law calls that payment for order flow (PFOF).

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How does a commission-free broker make money?

A commission of 0 USD does not mean the broker works for free. Two US brokers’ financial reports show where the money comes from: Schwab in 2025 and Robinhood in Q2 2026. Robinhood charges no commission on stocks, ETFs and options on them.
The two charts give two different pictures. At Schwab, commissions and PFOF together are 1,797 + 1,930 = 3,727 million USD, only 15.6% of net revenues, while net interest revenue alone is 49.1%. Robinhood is the reverse: transaction-based revenue is 59.3%, and stocks and options alone, the amount Robinhood calls PFOF, are 129 + 342 = 471 million USD, or 36.0%. Net interest revenue is interest earned on interest-earning assets less interest paid on funding, and both sides involve clients. Schwab’s report lists margin loans as one of the main interest-earning assets, and clients’ deposits as the funding it uses to invest in those assets. That means the money you borrow on margin and the money you leave in your account are both part of Schwab’s largest source of revenue. PFOF is calculated in two ways. Robinhood receives a share of the spread, the gap between the buy and sell price: 12.35% during regular trading hours. Fidelity receives a fixed amount per share: no more than 0.0008 USD for marketable orders, or no more than 0.08 USD for an order of 100 shares. Fidelity’s way of charging also changes over time: its Q1 2026 report says it did not receive this amount on stocks, while the Q2 2026 report says it has received it since April. The payment is controversial. Robinhood says PFOF makes wholesalers compete to give clients better prices, while Gary Gensler, then chair of the SEC, said in 2022 that wholesalers may keep more than the part they pass on to clients.

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What do you really pay a broker?

Commission is only one of the places a broker takes money from you, and the others differ by market.
Commission on US stocks and ETFs is 0 USD at Robinhood and at Fidelity for online trades (viewed October 8, 2026). The clearest cost that remains is margin interest. Say you buy 10,000 USD of stock with 5,000 USD of your own and 5,000 USD borrowed from the broker. Fidelity charges 12.075% a year on balances below 25,000 USD (viewed October 8, 2026), so the interest is 5,000 × 12.075% = 603.75 USD a year, about 50 USD a month.Each sale also carries the SEC fee and the FINRA trading activity fee, and Robinhood lists the current rate of both.
The NFA measures cost as the difference between the execution price and the midpoint (mid-point spread cost), and this measure works in every market that has a bid and an ask. Take an example with made-up numbers: when the broker receives an order to buy EUR/USD, the bid is 1.0800 and the ask 1.0802, so the midpoint is 1.0801. You trade at 1.0803, so the difference is 1.0803 − 1.0801 = 0.0002 USD per euro. A commission of 0 USD says only that one line of cost is zero, so when you work out the costs of a strategy you need to measure this difference from real execution prices.

Exchanges and OTC markets

Exchanges, off-exchange trading, and which products trade where.

Market participants

Who buys and sells in the market and who you are trading with.
Last modified on October 16, 2026