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To compare brokerage stocks, separate interest-related revenue from trading revenue, then trace the customer and other balances behind each company’s interest line. Use the same fiscal year, preserve each issuer’s own accounting labels, and read the annual report’s notes and management discussion before comparing figures. “Cash balance” and “net interest” do not mean the same thing at every broker.
How do brokerage firms make money from cash balances?
A broker may earn interest by investing or lending against certain balances while paying customers, banks, or other counterparties a different rate. The resulting economics depend on both the size and type of balances and on where they are held—not simply on a headline cash total.
Schwab says uninvested client cash held on its balance sheet is a primary funding source for its interest-earning assets. Robinhood, by contrast, describes interest revenues across a set of sources that includes margin loans, segregated cash, cash equivalents and securities, clearing-organization deposits, corporate cash and investments, Cash Sweep, and carried customer credit card balances. These disclosures illustrate why one firm’s “cash” or “interest” figure should not automatically be treated as equivalent to another’s.
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Start with the annual report’s income statement and revenue discussion. Then check the notes and management discussion for the balances and activities tied to interest: client cash or sweep deposits, segregated cash and securities, margin lending, corporate cash, securities lending, and other disclosed assets or funding sources. Do not assume all of these are included in a category called “net interest.”
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Which revenue lines should you compare?
Record the interest-related and trading-related categories as each company reports them, along with other major revenue lines. A useful comparison keeps the issuer’s wording intact rather than forcing every broker into a single taxonomy.
| Company | How its disclosures frame revenue | What to inspect |
|---|---|---|
| Interactive Brokers | Its 2025 Form 10-K discusses net interest income on customer balances and execution, clearing, and distribution fees. | Fee details and the filing’s discussion of exchange-fee and clearing-fee drivers. |
| Charles Schwab | Its 2025 annual report identifies net interest revenue, asset-management and administration fees, trading revenue, and bank deposit account fees among its largest revenue sources. | How uninvested client cash funds interest-earning assets, and how the company distinguishes its revenue lines. |
| Robinhood | Its 2025 Form 10-K describes multiple interest-revenue sources and reports transaction-based and other revenue separately. | The distinct balance types and activities included in the interest discussion, rather than treating all cash as one pool. |
For Interactive Brokers, the 2025 Form 10-K reports $420 million in execution, clearing, and distribution fees for the year and discusses exchange-fee and clearing-fee drivers. That is a reported fee category, not a universal measure of trading revenue across brokerages. (Interactive Brokers 2025 Form 10-K)
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How much of a broker’s revenue comes from trading?
Use the company’s reported trading or transaction-based line, and calculate its share against total revenue for the same fiscal year only when the categories and total are clearly defined. A company may report “trading revenue,” another may report execution and clearing fees, and another may use “transaction-based revenue.” Those lines can differ in scope and should not be presented as a directly comparable league table without reconciling the definitions.
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A practical method for comparing brokerage stocks
- Choose one reporting period. Compare the same fiscal year across companies where possible; do not mix a quarterly figure for one issuer with a full-year figure for another.
- Capture reported categories faithfully. Record interest-related revenue, trading-related revenue, and other material lines exactly as named in the income statement and revenue discussion.
- Trace the interest-generating balances. Use notes and management discussion to identify customer cash, sweep deposits, segregated balances, margin loans, corporate balances, securities lending, and other disclosed sources.
- Understand trading economics. Look for commissions, transaction-based revenue, order-flow revenue, execution and clearing costs, and principal activity where disclosed. A gross revenue category alone may not show the costs involved in generating it.
- Compare direction and explanation. Review year-over-year changes and management’s explanation. Interest revenue can change with rates as well as with the amount and type of balances.
- Check comparability before ranking. Note accounting definitions, company structure, period, and any reclassifications. Explain material differences before comparing raw amounts or revenue shares.
Schwab’s annual report identifies net interest revenue and several fee and trading categories as major revenue sources, while Interactive Brokers and Robinhood describe their own distinct labels and balance sources. Their reports therefore support a framework for analysis, not a reconciled three-company cash or interest-income table. (Schwab 2025 Annual Report; Interactive Brokers 2025 Form 10-K; Robinhood 2025 Form 10-K)
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What a cash-balance comparison can—and cannot—tell you
First establish what each reported balance represents: customer cash on the broker’s balance sheet, deposits swept to a bank, segregated customer assets, or another category. Then identify whether the company says it uses that balance to fund interest-earning assets or includes it in a broader interest-revenue discussion. A larger stated balance alone does not establish how much interest income it produces or how much the company retains.
Even when two companies report the same fiscal year, differences in business structure, category definitions, and presentation can make raw figures misleading. If a balance category or revenue definition is not established in the filing, leave the comparison unresolved rather than inferring equivalence. Company reports and earnings presentations can also update values or classifications in later periods, so attach every figure to its issuer, period, and reported label.
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This method compares business economics and public-company disclosures; it does not determine whether a stock is attractively valued, suitable for a particular investor, or likely to perform well.
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