How Does E-trade Make Money

There are many financial institutions that offer zero-commission trading in the United States. 

It is with great pleasure that we introduce you to the E*Trade online trading community in which we offer a range of products for online investors, such as bonds, futures contracts, mutual funds, stocks, options, and exchange traded funds (ETFs) that are pertinent to online investing.

The company is well known for offering free stock trades as part of its services. Learn more about how Morgan Stanley, the company that owns E*Trade makes money by utilising this website.

What is the profit model of ETrade if you do not charge any trading commissions? All you have to do is create an account, fund it, and you can start trading.

Despite how simple it may seem, did you know that a lot of work goes into creating it? Do you know what kind of business model this company has?

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How Does E-trade Make Money? (2022)

Brief history on E-Trade

Since 1982, E*Trade has had its own web platform, developed in Palo Alto, California. On May 18, 2020 Morgan Stanley (MS), a company listed on the New York Stock Exchange, acquired the popular trading website.

There was a reported $13 billion dollar deal completed by E*Trade and the full-service financial services firm, bringing it under the umbrella of E*Trade.

As of November of 2014, E*Trade had an estimated 4,100 employees and 30 retail locations throughout the United States. Consumers can conveniently manage their deposits and accounts through the local branches.

Due to the COVID-19 pandemic, most branches have temporarily closed, however online and by phone services have continued.

E-Trade’s Business model and Strategies

There are two main ways by which E-Trade makes money: through orders and through the interest earned on the free float. By investing its customers' money in money market funds, Etrade earns interest on the money they invest.

Furthermore, a third way in which they profit from Etrade is to lend users margin as a means of buying or shorting stocks.

Does Etrade offer any products or services?

Among the many products and services offered by Etrade, the most notable is their day trading platform, which is only the tip of the iceberg in terms of revenues. Let us take a quick look at what the company has to offer.

  • This is Etrade's platform through which retail investors can trade stocks without any commissions when trading US stocks using their broker account. As well as low-cost trading, they also offer bond trading as well as futures and options contracts.
  • Service for portfolio management - A service that allows retail investors to achieve their investment goals in ways that are tailored to their risk tolerance. Investors can opt for an automated or manual management process for their portfolios.
  • Bank Account - E*Trade also offers individuals, families, and businesses the opportunity to open a higher interest savings and checking account.
  • Etrade offers retirement accounts that serve as tax saving accounts, accounts for minors who wish to save, and accounts for people who wish to start saving at an age greater than 59.5 years of age.

Different ways through which E trade make money

Payment for Order Flow

Selling of HFT ( high - frequency Trading Firms)
It is E*TRADE's primary objective is to sell its clients' order flow to high-frequency trading firms (HFTs) in order to earn a zero commission.

The HFTs act as a middle man between the user and the market, handling the orders by acting as a "market maker." E*Trade gets compensated for guiding the order to the market maker in return for a fraction of a penny per share.

A market maker is a person who facilitates the trading process on the market, thus adding liquidity to it.

In order to make a commission on the spread between the bid and ask, the HFT processes the trade for the user as soon as they click the "buy" or "sell" button. The HFT is able to execute its trades within a fraction of a second.

Interest Income

E*TRADE offers loans to its clients, who earn interest on their outstanding balances. There are no risks associated with the loans offered by E*TRADE.

Data indicates that significantly more than 60% of E*TRADE's revenues are generated by interest on loans. The net interest income generated by E*Trade in 2019 generated more than $1.8 billion in revenue.

Commissions on Trading

There is an opportunity to trade stocks and ETFs commission-free on E*TRADE, too, but the comp=any uses a payment for order flow type of business model.

Furthermore, the company offers traders the possibility of trading in options, bonds, and futures contracts at very competitive rates.

It is estimated that E*TRADE has made $421 million in net commissions for the 2019 year, based on the asset classes these lenders are able to offer.

Each time a trade is placed using options, futures, or bonds, the trader pays for this service, and it does not come for free.

Fees and Service Charge

The majority of the money made by E*TRADE comes from payments for order flow and from loans at cash interest rates. However, as they are still in the business of offering their clients a variety of portfolio management services, they will charge their clients a fee for these services.

Through E*TRADE, you have the option to manage a portfolio and set up an individual retirement account (IRA). By charging fees and service charges to clients, the company earns its income through the provision of these services.

E*TRADE charges its clients $25 for premature withdrawals of their retirement accounts when it comes to the management of these accounts.

As well as trading on margin, it is also possible for the company to make money by charging its users a market access fee, where the company charges their users between 5.45% and 8.95% of the margin they use when placing the trade.

Future Contracts

The commission charged by E*Trade per contract is $1.50. When it comes to cryptocurrency futures, however, the commission goes up to $2.50.

It is also important to know that investors may be charged additional fees through their futures exchange, which are different from what is assessed by E*Trade.

Margin Rates

Investing in margin accounts allows investors to borrow funds for transactions in order to leverage their investments. There are margin account fees that are charged by E*Trade anywhere between 5.45% and 8.95%.

Depending on how much you borrow on margin, the fee may vary. If you have a low debt balance, you may be charged a higher interest rate.

Website Link for E*Trade Platform:

Pros and Cons of E*Trade


  • Financial consultants and specialists are available to users at no cost
  • Traders of all levels can use this intuitive platform, regardless of their experience level
  • The educational resources offered by the school are very powerful, including webinars, courses, and articles
  • For investors who are interested in testing out new strategies, there is a paper trading feature available
  • Trading options and futures has never been easier, with excellent tools and resources


  • There is a lack of customer service, especially over the telephone
  • There are no fractional shares in the company
  • There is no access to cryptocurrencies
  • Trading in foreign exchange (forex) is not allowed
  • It is not possible to integrate a trade journal into the website



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Throughout our history, they have prided themselves on continuously improving their platform and providing intuitive and useful tools that help one to make smarter financial decisions.


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Investors can take advantage of E*Trade's comprehensive trading platform in order to do a variety of transactions related to their investments.

Broker-assisted services are offered by some insurance brokers either in the form of a telephone call or in the area of a local branch to help anyone who is unwilling to completely do it on their own.

E*Trade is a company owned by Morgan Stanley, and it is through Morgan Stanley that investors may invest in the company.

Detailed E*Trade Review: 

3 Of The Best Features On E*Trade — Brokerage Review And How To Use The Platform


Q. Is E-Trade really free?

Ans. It is free to access E*TRADE Web and Power E*TRADE. You do not need to have a minimum balance or trade activity to make use of both of these services. With E*TRADE Web, you get free market data streaming, free real-time quotes, stock screenings and analyst research, among other services.

Q. What percentage does ETrade take?

Ans. Investing in stocks, ETFs, and options online with E*TRADE carries no commission. If less than 30 trades per quarter take place, then options contracts will be priced at $0.65 per contract

Q. Can ETrade Be Trusted?

Ans. There are many online brokers that offer options trading, but E*TRADE is one of the best. From beginner investors to advanced traders, this is a well-rounded, solid choice that is suitable for all types of investors.

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