Free Stock Trading Platforms – Are They Really Free?

There are already a number of free platforms for trading stocks going around nowadays. But the biggest question is that, how can these platforms make money to sustain their operations when they have waived the commission. A thorough inspection reveals that there are a lot of activities that’s been going around behind these brokerage platforms to earn and build profits, most of the time, it causes harm to the clientele. Because of this, it is very important to keep an eye on these commission-free platforms so as to avoid having to pay so much more than you expect.


There are a lot of stock trading and FX trading platforms offering free services but they have come and gone over the recent years, which raises its liability and effectiveness. For instance, the trading platform Loyal3 has shut its doors since 2017. However, they have transferred their accounts to FolioFirst which now charges a monthly fee applicable to its remaining customers. The operation of this broker is done by billing public companies directly so they can provide shares for their clients and make IPOs accessible. They have bypassed the practices of the industry to keep such small investors from acquiring shares.

But sad to say, the broker failed to secure a list of equities as the companies who joined their program are only 66.

Robinhood Financial

One of the top players in the free trading stocks platform is Robinhood Financial. They offer both margin and cash accounts. They claimed themselves a ‘free stocks trading platform’ that is keeping their business steady through the interest acquired from the uninvested part of the client’s funds. But behind those ‘free’ claims, there are different profit strategies such as monthly fees for those upgraded services, margin lending, and rehypothecation. This service has been using the client securities mainly for collateral so they can push through with other financial means of income.

Rehypothecation happens when a margin account between a broker-dealer utilizes an asset, in this case, stock securities are being used – as a means of collateral to get past their own responsibilities or interests. To put it simply, they will be able to borrow funds from the bank, through the use of your stocks as their collateral. This technique may work out quite well. But when things get messy and the financial crisis hits the company, your stocks will be put to vain.

New customers are normally placed in margin accounts where they get too exposed to rehypothecation. However, there might also be options to manually downgrade your accounts to cash accounts. The margin interests are mostly waived out of the standard accounts as for upgraded accounts in Robinhood, they will have to pay for a monthly fee, which then adds to the income of the company. In the end, there is really no such thing as ‘free’, with no strings attached in the stock trading platform.


There are a lot of free stock trading platforms that came and went by for the past few years. But nowadays, Robinhood is the dominating party over this market niche. Avoid expecting too much on these ‘free’ platforms as nothing is actually free in the FX trading and Stock trading world.