How Does Webull Make Money?

With the onset of more casual investors, a variety of discount investment platforms have emerged. Webull is one such platform that offers mobile or desktop use with an excellent variety of tools.

Since it is advertised as a free platform and does not charge a commission for trades, this leaves many people wondering “How does Webull make money?”. In this article, we’ll delve into this topic, so you can have all the information you need to decide if Webull is the right choice for you.

Webull currently offers new users up to 12 free stocks for trying the platform. You’ll get two free stocks (each worth $3 – $3,000) for signing up. Deposit any amount to get up to 10 more free stocks. Sign up for Webull through this link to be eligible for the bonus.

The Webull Basics

Webull is an online brokerage that allows its users to trade stocks, options, ETFs, and cryptocurrencies without paying commissions. Webull has been around since 2017 and its initial focus was to provide sophisticated chartering tools so its users could make better trading decisions. However, after the success of Robinhood, the platform quickly evolved into an investment platform.

Read our head-to-head comparison of Webull vs. Robinhood to learn more about these platforms.

Due to its placement as a budget investment platform offering innovative tools, Webull has shown impressive growth. In 2020, the platform increased its retail investors to over two million.

The main attraction for Webull is that it not only offers commission-free trades but also has no minimum deposit requirements. You can access in-depth analysis tools and the platform is available via an app for Android and iOS devices, a desktop app supported by Windows, Mac and Linux, or in any internet browser.

Read our Webull review to learn all of the details about how Webull works.

How Does Webull Make Money?

Since there is no commission for trades, you may be wondering how Webull makes money. There are actually several different ways that the company generates revenue, including:

Paid Subscriptions

While basic users will appreciate the lack of commission, if you want to access greater in-depth data analysis, you’ll need a paid subscription and this is the most obvious way that Webull makes money.

For example, if you’re a trader who wants access to TST Level One, you would need a Webull subscription. The cost of subscriptions can vary and Webull does run promotions where you can access level one or level two subscriptions at a discounted price.

With a subscription, you can access up-to-the-minute prices and there are different quotation levels to show more granular data. This can be useful to identify micro-trends, which you could capitalize on.

Interest on Cash Balances

Many investors tend to leave cash in their brokerage accounts while deciding what to buy next. However, when cash is idle in your account, you will not earn any interest on the balance. This is a common feature, particularly with free brokerage platforms.

However, this also provides Webull with another source of income. Webull has the capability to borrow cash in its user accounts to invest for short-term gains or as a loan for other users. Webull may only make a small amount of interest on cash balances, but when this is applied across all idle cash balances on the platform, this can add up to a significant source of revenue.

Although this may seem a little worrying, it’s simply what happens with your local bank or almost every other financial institution. The funds are still yours and SIPC insurance ensures that the cash held in your account for investment purposes is protected. So, should the worst happen and something occurs with your cash due to mismanagement, you’ll have some protection.

Margin Fees

While it isn’t recommended (due to high risk), it has become popular for investors to buy on margin. Margin trading occurs when investors buy more stock that their brokerage account funds can cover. Essentially, you’re borrowing money from the broker to make your investments. The broker extends a loan so you can buy additional shares of stock or ETFs.

As with any type of loan, you will pay interest on the amount loaned to you, and the assets in your portfolio will serve as collateral for the loan. This means that when you use margin to buy securities, you could use a combination of your funds and a loan from the broker.

Webull does offer margin trading on the platform, but you will pay fees for this service. The fees to trade to margin vary from 3.99% to 6.99%, but they can fluctuate with market rates.

The interest earned from offering margin is another way that Webull makes money, but unless you’re an advanced trader, this is not something you should consider. If you’re a newbie or have not yet developed your investment experience, it’s best to stick to only investing with cash and not buying on margin.

Short Selling Fees

When investors sell stocks that they don’t own, it is called short selling. Investors wanting to short stocks believe that the prices of that stock will fall or they want to protect themselves against potential price volatility for securities that they own. If the stock price drops, short sellers are able to buy stocks at lower prices to make a profit. However, if the stock price increases, short sellers incur a loss.

Brokerages often loan shares to short sellers and will charge interest as part of the process. In most cases, the shares that are loaned out are owned by the platform users. This is essentially like earning interest on your non-invested cash, which is a common practice within the finance industry.

As with your cash balance, you don’t need to worry about getting caught out by mismanagement, as your shares are protected by SIPC insurance.

By lending shares to short sellers, Webull can make money through interest fees. Short sales tend to cost a fee or interest for borrowing the stocks. Webull changes the interest fees each day for every available stock and the interest applies daily, making it a very profitable activity.

There are some requirements to short sell on Webull. You’ll need a margin account and have a net account value of $2,000 or higher. However, as with buying on margin, shorting is an advanced technique that you should only consider when you’ve developed your investment experience.

Payment for Order Flow

Another way that Webull makes money is by directing order flow. When you initiate a buy or sell order, Webull determines which market maker will receive the order. Free brokerages like Webull tend to make money by selling order flow. Order flow occurs when someone predicts the price of securities will move and then executes an order in the market. Webull will earn a fraction of a cent for each trade place. Although these are very small amounts, they can quickly add up within a robust trading platform.

Essentially, market makers such as banks may pay Webull a fraction of a cent for each share as compensation for sending orders to them rather than another market maker. Since there are millions of share trades on Webull each day, these fractions can add up to millions of dollars.

Payment for Order Flow (PFOF) is a bit of a controversial issue in the industry. Many feel that it’s not in the best interest of investors. While most brokerages do generate revenue with PFOF, some have abandoned the practice. For example, Public.com is PFOF-free since they believe their users are better off without this practice.

Other Account Fees

Although Webull does not charge trading fees or commissions, platform users may incur other account fees.

For example, if you transfer stocks from Webull to another broker, you’ll incur a $75 fee for each outgoing transfer. Technically, Webull does not benefit financially from this type of transfer, as the transfer fees are charged by its clearing firm, APEX. Webull does not charge fees for incoming transfers, but you may incur a fee from your outgoing broker.

Most of the other account fees (like wire transfers, paper statements, etc.) that you may incur are charged by the clearing firm, so they are not really a source of income for Webull, but you should be aware of the fees if you’re considering using the platform.

Related reading: Ways to Get Free Stock

Is Webull a Good Trading Platform?

Webull provides a good option for investors who want to start trading with no commission or account minimums. While it is not a full-service broker, Webull does offer some great tools that can help you to develop your investing expertise and build your confidence.

While Webull does make money in a number of ways, it provides a low-cost option for active traders who want to make the most of their investment funds and not have to worry about trade commission or hefty account management fees. However, as with most financial platforms and products, there are both pros and cons to consider.

The Pros of Webull

• Free Trades: This is the most obvious plus point for Webull, as the platform makes it easier for you to profit off your trades.
• Easy Account Opening: Another advantage of Webull is that the account opening process is quick and easy. The entire process only takes a few minutes and you can set up a free ACH transfer from your bank account, so you can start trading with minimum delay.
• Real Time Streaming Quotes: Webull offers free real time streaming quotes and you can also access Level 2 Advance quotes with a free three month subscription. This is a Nasdaq TotalView service, which provides greater depth of bids and information showing market depth. You can also access auction crossing information for NASDAQ NYSE listings.
• Intuitive App and Desktop Interface: While Webull does require that you take a DIY approach to your investment strategies, both the desktop and app have an intuitive, easy to use design, packed with helpful tools. Despite having a customizable platform for watchlists, news and company information, it’s set up for an effective and streamlined work process.
• Extended Trading Hours: Webull customers can access extended hour trading periods, so you can choose if you want your orders active during non regular trading times.

The Cons of Webull

• No Cash Balance Interest: We’ve mentioned this above, as using the idle cash in trading accounts is one of the ways that Webull makes money. However, this does mean that you won’t earn any interest you leave in your account as you’re deciding on your next trade.
• Price Execution Quality: Since Webull receives payment for order flow to generate income, it may reduce the price execution quality. Webull is likely to choose market makers that offer a balance between quality and how much commission they pay. This should not be a significant issue for most traders, but if you’re implementing strategies that are highly dependent on execution speed and precision, it could be a disadvantage of the platform for you.
• No Advisors or Recommended Portfolios: While there are lots of helpful tools, you will need to be self sufficient in your trading decisions as there are no financial advisors, recommended portfolios or robo advisors on the platform. So, if you need hand holding, this may not be the best platform for you.
• Limited Investment Options: Currently, Webull only offers stocks, options, ETFs and cryptocurrencies. While this may change in the future, if you want to invest in mutual funds, foreign exchange or international equities, you’ll need to consider other platforms.

Frequently Asked Questions

Final Thoughts on How Webull Makes Money

Commission-free trading platforms like Webull obviously have to generate revenue somehow. If you’ve been wondering “How does Webull make money?”, your questions should be answered by the items discussed above. Webull has a few different revenue sources, but the platform is completely free for most users. With commission-free trades, no fees for a basic account, and no minimums, there’s a lot to like about Webull.

Webull currently offers new users up to 12 free stocks for trying the platform. You’ll get two free stocks (each worth $3 – $3,000) for signing up. Deposit any amount to get up to 10 more free stocks. Sign up for Webull through this link to be eligible for the bonus.