Zero-Commission Trading Startup Reveals Truth About Business Model

by Danielle Park
Juggling Dynamite

For years I have been pointing out that on-line trading platforms are all about the providers making profits off of the gambling impulses of their users. The business model is about capitalizing on addictive behavior and profiting as users bet their brains out, especially on margin.

For the investment banks that have underwriting and proprietary trading desks, their discount brokerage arms are just another captive distribution channel for product as well as “dumb money” on whom they can front-run, gouge spreads, re-hypothecate and trim other hidden timing profits. As discounters competed for fresh blood over the past 15 years, transaction rates dropped from dollars to pennies, and finally a focus on who was giving away the most trades “for free”.

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