How does ETrade make money? (2024)

ETrade makes money through offering discounted brokerage services to stock traders, investors, financial professionals, and other individuals. ETrade earns payments from orders and collects interest that it earns on the free float.

Here is a look at the ways ETrade makes money:

• Payments for Order Flow

  ETrade makes a fraction of a penny per share when it sells its client's stock order to high-frequency trading (HFT) firms. ETrade made around $188 million in 2019 from this business strategy alone.

• Collecting interest

  ETrade also provides loans to its users associated with banks, investment banks, and other financial institutions. The company then makes profits on the interest that it incurs from those loans. This is by far the biggest money-making for the trading company as it saw over $1.8 billion in profits from this portion of its business in 2019.

• Commissions on trades

  ETrade also generates revenue from commissions on trades it oversees. The company made $421 million in net commission profits in 2019.

• Service charges and fees

  ETrade also generates profits from charging its users fees and service charges. These are normally associated with the portfolio management services the company offers its users.