> ## Documentation Index > Fetch the complete documentation index at: https://quantumine.net/learn/llms.txt > Use this file to discover all available pages before exploring further. > ## Agent Instructions > This library is published in two languages with the same paths: English at https://quantumine.net/learn/ and Vietnamese at https://quantumine.net/learn/vi/. Add .md to either address for the Markdown version. > llms.txt and llms-full.txt list the English pages only. When the reader writes in Vietnamese, read and cite the Vietnamese page. > To search the library, connect to the MCP server at https://quantumine.net/learn/mcp. Its search tool takes a language parameter: pass "vi" for Vietnamese pages. > The library is licensed under CC BY 4.0: it may be quoted, reused and used to train models. Credit Quantumine and link to the page you used. # Brokers > A broker is a firm that takes your orders to the market and holds your account. A commission-free broker still earns money from interest, asset management fees and payments from the firms that fill its clients' orders. 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](https://www.law.cornell.edu/uscode/text/15/78c): a broker trades for the account of others, and a dealer trades for its own account. The US securities regulator [SEC](https://www.sec.gov/about/reports-publications/investor-publications/guide-broker-dealer-registration) 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. ## 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. > [tab] US stocks > > A US stock broker is a broker-dealer registered with the SEC. [Most brokers and dealers must join a self-regulatory organization (SRO)](https://www.sec.gov/about/reports-publications/investor-publications/guide-broker-dealer-registration), usually FINRA, and [every registered broker-dealer must be a SIPC member](https://www.sec.gov/about/reports-publications/investor-publications/guide-broker-dealer-registration). [Rule 15c3-3](https://www.law.cornell.edu/cfr/text/17/240.15c3-3) 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](https://www.sipc.org/about-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](https://www.sipc.org/for-investors/what-sipc-protects). SIPC does not cover losses from a fall in the price of securities. > [tab] Futures > > US law distinguishes two kinds of futures broker, the FCM and the introducing broker, by whether they hold clients' margin. > > > [card] FCM (futures commission merchant) > > > > **Takes orders and holds margin.** Under the [law](https://www.law.cornell.edu/uscode/text/7/1a), an FCM accepts clients' money, securities or property as margin to secure their trades. > > > [card] Introducing broker > > > > **Takes orders only.** An introducing broker accepts clients' orders but [does not accept money, securities or property](https://www.law.cornell.edu/uscode/text/7/1a) as margin for those orders. > > Because an FCM holds your money, the law adds a rule: an FCM must [treat clients' money as belonging to clients, record it separately and not mix it with its own](https://www.law.cornell.edu/uscode/text/7/6d). In futures you rely on this segregation rule, not on SIPC, because [SIPC does not protect futures contracts (except special portfolio margining accounts) and does not protect deposits for commodity trades either](https://www.sipc.org/for-investors/what-sipc-protects). > [tab] Crypto > > In crypto, one company can do the work of an exchange, a broker and a custodian. [Coinbase's 2025 annual report](https://www.sec.gov/Archives/edgar/data/1679788/000167978826000015/coin-20251231.htm) shows it: the group runs four exchanges, has a subsidiary that is a broker-dealer registered with the SEC, and two other subsidiaries that hold most of the crypto assets on the platform. > > > [card] Exchange and broker in one > > > > **One company does all three jobs.** It runs the exchange, takes your orders and holds your assets. Coinbase is an example. > > > [card] Brokerage app > > > > **The broker routes orders away.** Robinhood lets clients route crypto orders to market makers without paying commission, and [receives transaction rebates](https://www.sec.gov/Archives/edgar/data/1783879/000178387926000023/hood-20251231.htm) for it. > > Crypto assets on an exchange do not have the protection securities have. [SIPC does not protect any crypto asset that is not a security](https://www.sipc.org/for-investors/what-sipc-protects), and Coinbase itself warns in its [2025 annual report](https://www.sec.gov/Archives/edgar/data/1679788/000167978826000015/coin-20251231.htm) that if the company went bankrupt, clients could be treated as unsecured creditors, and crypto assets are not insured or guaranteed by any government. The worry has a precedent: in December 2022 [the SEC alleged](https://www.sec.gov/newsroom/press-releases/2022-219) that FTX clients' money had been moved to Alameda Research without disclosure. > [tab] Forex and CFDs > > A forex broker stands in a different place altogether: the broker itself is the other side of the order. US law defines a firm that sells forex to retail clients, a [retail forex dealer](https://www.law.cornell.edu/cfr/text/17/5.1), as one that is or offers to be the counterparty to the client in forex trades. Even if the broker automatically places your order again with a third party (STP, straight-through processing), it is still your counterparty: the US futures and forex self-regulatory organization [NFA](https://www.nfa.futures.org/members/member-resources/files/forex-regulatory-guide.html) does not let a dealer that uses STP say it is not the client's counterparty. The two ways a broker then handles the order are B-book and A-book, and the article [Market participants](https://quantumine.net/learn/learn/foundations/market-participants.md) explains both. > > The European Union's securities regulator [ESMA](https://www.esma.europa.eu/press-news/esma-news/esma-agrees-prohibit-binary-options-and-restrict-cfds-protect-retail-investors) announced measures for CFDs sold to retail clients in 2018. Maximum leverage ranges from 30:1 for major currency pairs to 2:1, positions are closed when margin falls to 50% of the minimum, and clients do not have to cover losses beyond the money in their account (negative balance protection). For clients of a broker in the EU, these are rules already in place, not the broker's choice. > > The money you deposit for foreign exchange trading is not under SIPC either, because [trades in currency and foreign exchange are not securities](https://www.sipc.org/for-investors/what-sipc-protects). ## 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](https://www.law.cornell.edu/cfr/text/17/242.606) requires US brokers to publish each quarter where they sent their clients' orders. These reports are XML files, such as [Fidelity's](https://clearingcustody.fidelity.com/-/media/project/shared-regulatory/xml/fbs-q2-2026.xml) and [Robinhood's](https://cdn.finra.org/606/2026/287900_606_NMS_2026_Q2_V1.xml), 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](https://quantumine.net/learn/learn/foundations/market-participants.md) 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)](https://www.law.cornell.edu/cfr/text/17/240.10b-10). ## 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](https://www.sec.gov/Archives/edgar/data/316709/000031670926000009/schw-20251231.htm) in 2025 and [Robinhood](https://www.sec.gov/Archives/edgar/data/0001783879/000178387926000113/q22026robinhoodexhibit991.htm) in Q2 2026. [Robinhood charges no commission](https://robinhood.com/us/en/support/articles/trading-fees-on-robinhood/) on stocks, ETFs and options on them. > [tab] Schwab > [tab] Robinhood 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](https://www.sec.gov/Archives/edgar/data/1783879/000178387926000023/hood-20251231.htm), 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](https://www.sec.gov/Archives/edgar/data/316709/000031670926000009/schw-20251231.htm) 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](https://cdn.finra.org/606/2026/287900_606_NMS_2026_Q2_V1.xml). Fidelity receives a fixed amount per share: [no more than 0.0008 USD](https://clearingcustody.fidelity.com/-/media/project/shared-regulatory/xml/fbs-q2-2026.xml) 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](https://clearingcustody.fidelity.com/-/media/project/shared-regulatory/xml/fbs-q1-2026.xml) 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](https://robinhood.com/us/en/newsroom/demystifying-payment-for-order-flow/), while Gary Gensler, then chair of the SEC, said in 2022 that wholesalers [may keep more than the part they pass on to clients](https://www.sec.gov/newsroom/speeches-statements/gensler-remarks-piper-sandler-global-exchange-conference-060822). ## 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. > [tab] US stocks > > Commission on US stocks and ETFs is 0 USD at Robinhood and [at Fidelity](https://www.fidelity.com/trading/commissions-margin-rates) 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](https://www.fidelity.com/trading/commissions-margin-rates) 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](https://robinhood.com/us/en/support/articles/trading-fees-on-robinhood/) of both. > [tab] Futures > > Futures still charge commission per contract. [TradeZero America lists](https://tradezero.com/en-us/support/questions/what-are-the-contract-specifications-for-the-e-mini-s-and-p-500-tradezero-america) 1.29 USD per contract, per side, for the E-mini S\&P 500 (viewed October 8, 2026). Buying and then selling one contract is two sides, so the commission is 2 × 1.29 = 2.58 USD. One tick (the smallest price step) of this contract is 0.25 points, or 12.50 USD, so a round-trip commission is 2.58 / 12.50 = 20.6% of a tick. > > That figure does not include exchange fees, clearing fees and the fee of the futures industry's self-regulatory organization NFA, since TradeZero's page does not list them. > [tab] Crypto > > Crypto charges commission as a percentage of the order's value. [Binance's spot fee schedule](https://www.binance.com/en/fee/schedule) for a Regular User lists 0.100% both for an order that rests in the book (maker) and for an order that trades at once against a resting one (taker), as read on October 8, 2026; the page gives no effective date. Each buy or sell order worth 1,000 USD costs 1,000 × 0.100% = 1.00 USD in fees. > [tab] Forex > > In forex the broker charges within the price. [The NFA requires dealers](https://www.nfa.futures.org/rulebooksql/rules.aspx?RuleID=RULE+2-36\&Section=4) to tell clients the mark-up or mark-down they add to the price when they automatically place an order again with a third party, and otherwise the difference between the execution price and the midpoint of the bid and ask at the time the order was received. 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. ## Read next > [card] [Exchanges and OTC markets](https://quantumine.net/learn/learn/foundations/exchanges-and-otc-markets.md) > > Exchanges, off-exchange trading, and which products trade where. > [card] [Market participants](https://quantumine.net/learn/learn/foundations/market-participants.md) > > Who buys and sells in the market and who you are trading with. This documentation is built and hosted on [Mintlify](https://mintlify.com), a developer documentation platform.