Most of you have probably heard of Webull, but for those of you who haven’t, Webull is one of the closest competitors to Robinhood. Like Robinhood, it is a FREE trading platform that charges no commission fees for transactions that take place on its platform. It is currently only available to residents of the United States.
Since trading on Webull is completely free, you might be wondering, “Does Webull Make Money”? The answer is yes!
If you’re interested in knowing more about Webull, we have an entire Webull review where we go over everything you need to know about Webull. In that article, we briefly touch on how Webull makes money, however, the number of ways in which Webull makes money requires a detailed explanation, all too long to fit into a Webull Review.
Thus, in this article, we will be taking an in-depth approach to analyzing how Webull makes money.
When customers join Webull, they automatically start off on a free account. In the regular free account, you have access to on-the-minute market data from any company in the US.
However, sometimes US market data is not enough. Sometimes investors are looking to put their money to work outside the borders of the United States. Thus, these investors would be looking for global market data.
For these customers, Webull offers a paid subscription to access on-the-minute global market data. This is a monthly subscription that ranges from $2.99/month to nearly $60/month for some data resources. If you access global data with a free account, the data you are seeing is lagging by about 15 minutes. Hence the example below.
Again, this only applies to market data outside of the US. All the data provided for US markets is 100% FREE.
Interest On Uninvested Cash
Webull makes interest from the uninvested cash in its users’ accounts. Some brokers, like Robinhood, pay part of the interest they earn to customers on their uninvested cash, Webull does not. Most people invest the majority of the cash they have in a broker and leave a very small percentage as uninvested cash.
Although this may not seem like a lot, the amount of uninvested cash really adds up once you multiply it by the number of users that Webull has. Webull makes money on this cash by lending it into short-term funds or money market accounts that pay small amounts of interest.
This is a practice followed by every brokerage around, it’s nothing new or different for brokers to do this with uninvested cash. And don’t worry, your cash is safe. This money is insured up to $250,000 by the SIPC. If something were to happen as a result of mismanagement, this cash is safe.
A popular investment strategy is buying on margin. This isn’t particularly something I’m personally a fan of, but many traders out there use this strategy. If you are unfamiliar with this, this is simply when an individual investor borrows money from a broker to buy investments. The securities (stocks, ETFs, etc.) that the investor already owns on the platform serve as collateral for the borrowed money. Webull charges interest fees to trade on margin staring at 3.99%.
Trading on margin is not something you have to do when using Webull, you can always open a regular account and simply invest with money you actually have.
Directing Order Flow
There are a number of different market makers or exchanges that Webull can send orders to whenever a customer makes a transaction.
The way this works is whenever you buy or sell a security, Webull directs that order to a specific market maker. These market makers may pay Webull fractions of a cent per share that they send to them, instead of a different market maker.
Although this may not seem like a lot of money, in a large trading platform like Webull, these fractions of a cent add up with the large volume of transactions!
Short Selling Fees
Short selling happens when a short seller borrows a stock, sells it, then buys it back (ideally at a smaller price to make a profit) to return it to the lender. Webull lends this stock to short-sellers by borrowing it from its users. Again, this borrowed stock is SIPC insured (in this case up to $500,000), so it is safe.
When Webull lends this stock to short-sellers, it charges a fee for borrowing the stock of the said company. The rate of this fee varies by conditions in the market.
- Deposit & Withdrawal Wire Fees: Depositing money via domestic wire transfer costs $8 for incoming money and $25 for outgoing money. International wires are $12.50 for incoming, $45 for outgoing. Please note, wire transfers are different from the usual ACH transfers, these are FREE.
- ACAT Fee: Webull charges a $75 fee for outgoing transfers to other brokers, but not for incoming money from other brokers.
- Passing On Regulatory Exchange Fees: Brokers that charge a commission don’t usually pass these regulatory exchange fees because the commission fees themselves cover them. In the case of Webull, these are passed to the customer because there are no commission fees to cover them.Below is a list of the regulatory exchange fees.
- ADR Fees: Webull passes on fees to the customer for holding ADRs. If you are unfamiliar with ADRs, they stand for American Depository Receipts. An ADR is a certificate issued by a U.S. depositary bank representing a specified number of shares of a foreign company’s stock, this certificate’s value is determined on the basis of the custodian bank where the brokerage sends the shares.
The ADR trades on U.S. stock markets as any domestic shares would and offers investors a way to purchase overseas stock that would otherwise not be available to them. There are usually fees charged by the bank to the brokerage for the ADRs, this is the fee passed to the investor using ADRs.
Webull offers a creative way to provide customers with an easy-to-use free platform to trade on. The additional paid features they offer are a great way for them to make money. Webull also follows the same practices as other investors to make money, collecting interest on uninvested cash, earning micropayments for directing order flow, and charging for loaning shares to short-sellers are all practices followed by many other well-establish brokers.
As Webull continues to grow, it continues to improve. These improvements are what have made Webull so popular in such a short amount of time. Let’s also not forget the generous incentives they provide for investors simply for signing up for an account.
If you have any questions about Webull or would like to share your experiences with Webull, please leave them down in the comment section below! I would love to read about what you all have to say about it!