(ETFs), cryptocurrencies and options that was founded in 2017 by former Alibaba Group Holding (NYSE: BABA) employee Wang Anquan. The company is structured as a Delaware limited liability company owned by Chinese holding company Fumi Holdings Inc.
After Anquan became aware of the pioneering Robinhood Markets Inc. (NASDAQ: HOOD) trading platform and the phenomenal success it was having with its commission-free trading model, he started Webull as a competing company with a similar business model.
Since Webull charges no commissions for transactions, people often wonder how they make money. In the following sections of this article, Benzinga gives a detailed explanation of how Webull makes money, what business model it uses and the valuable services provided by the online broker’s platform. Keep reading to find out more about Webull and how it can benefit clients.
How Does Webull Make Money?
Webull is a commission-free broker, so while it makes no money from charging per-transaction fees to its clients, the company’s primary revenue stream comes from selling its substantial order flow to market makers.
Other forms of income Webull makes money from include interest revenue from short-sellers who borrow stock, interest income on credit balances, paid subscriptions and margin interest payments. Below you can read in detail about these income streams and how Webull makes money from them as part of its commission-free business model.
Payment for order flow
Webull’s main revenue stream comes from selling its order flow to stock market makers. The way Webull makes money selling its order flow is that every time a Webull client enters an order, Webull sends the order to one of its market maker partner firms. The firm then uses that order flow for its high-frequency trading (HFT) strategies.
Market makers generally quote two-sided markets in stocks and may hold short or long positions in them. They serve as an intermediary between Webull’s clients and the actual listed stock market. Market makers pay an average of $0.00024 per share for Webull’s stock order flow and an average of $0.525 per options contract. Given enough trading volume, that income can add up substantially over time.
Loans to short-sellers
Another major revenue stream that makes Webull money is the stock loan business. Webull offers a stock lending program that shares the revenue with investors that lend out their securities. The interest paid on the lending program depends in large part on the stock involved, the broker loan rate and the amount of demand for the securities.
For example, if a stock has been under considerable selling pressure, then the level of demand for borrowing its shares to sell them short increases. This in turn raises the market interest rate that short-sellers need to pay for borrowing those shares to sell them short.
The formula Webull uses to calculate short selling fees can be seen below:
Daily margin interest on a short position = (daily market value of the borrowed stocks after the market close X the stock loan rate for the stock) / 360
Keep in mind that depending on the stock and how difficult it might be to borrow, the interest rate on the stock loan for that stock might be extremely high. This cost can make short-selling prohibitively expensive in some cases.
Interest on free credit balances
Many stock traders and investors leave cash in their brokerage accounts while they wait for the next stock trading opportunity. Webull pays its clients no interest on excess funds in their trading accounts, but it collects interest on all such credit balances by placing the funds on deposit with its banking partners.
Margin interest payments
Margin accounts also provide Webull with a reliable revenue stream. Webull provides its trading clients with a margin account that offers enhanced buying power of up to 4 times for day trades and 2 times for overnight trades. This feature means that you can trade 4 times more stock on margin during the trading day and twice the amount of stock overnight than you would ordinarily be allowed to do given the balance in your account.
To open a margin account, you must deposit a minimum of $2,000 to qualify. Margin interest is variable and determined by the size of the loan you take out to leverage your trades. The annual margin rates charged by Webull for various debit balances can be seen in the table below.
|Annual Margin Rate
|$0 - $25,000.00
|$25,000.01 - $100,000.00
|$100,000.01 - $250,000.00
|$250,000.01 - $500,000.00
|$500,000.01 - $1,000,000.00
|$1,000,000.01 - $3,000,000.00
Webull offers premium services like Level I and Level II stock quotes for an additional monthly fee. Premium services for advanced data plans cost anywhere from $2.99 per month to $24.99 per month depending on what services you decide to use.
Deposit and Withdrawal Fees
Unlike most other online brokerages, Webull charges for incoming bank wire deposits. Making a deposit via a domestic wire transfer costs $8 while withdrawing funds using the same method costs $25.
International wires cost clients even more. Incoming wires cost $12.50 while withdrawing funds will set you back a whopping $45 fee per withdrawal. Automated Clearing House (ACH) network transfers carry no cost, although you will be charged $30 if you want to reverse an ACH transaction.
Does Webull Offer Investors Value?
Trading stocks, ETFs, options and cryptos commission-free has a significant amount of value to anyone actively trading in the financial markets. Webull offers investors value, especially if you take advantage of its excellent mobile trading platform, competitive margin rates and traditional individual retirement accounts (IRAs).
In addition to all that, you get the ability to access full extended trading hours via Webull, including pre-market trading from 4:00 a.m. - 9:30 a.m. ET and after-hours trading from 4:00 p.m. - 8:00 p.m. ET.
Webull also has no minimum deposit requirement, and you can get access to valuable market data for a modest monthly subscription fee of $1.99 - $24.99 that can include Level II quotes and premium market research.
How much value Webull offers investors and traders can also be gleaned from the product descriptions listed below.
Webull provides its clients access to trading most U.S.-listed stocks commission-free. You will still have to pay some minor Financial Industry Regulatory Authority (FINRA) regulatory and regulatory transaction fees, which amount to a fraction of a penny per share.
While you can trade most U.S. listed stocks through Webull, including penny stocks if they are listed on either the New York Stock Exchange (NYSE) or the Nasdaq Exchange (NASDAQ), the broker does not provide access to over-the-counter (OTC) or pink sheet penny stocks (stocks priced under $5 per share).
You can also trade listed American Depository Receipts (ADRs) to buy and sell foreign stocks such as BioNTech (NASDAQ: BNTX), Alibaba and AstraZeneca (NASDAQ: AZN).
Webull gives users access to ETFs that provide domestic and international investment opportunities. Webull offers commission-free trading on these instruments without minimum purchase requirements, so you only have to pay the modest regulatory transaction fee to FINRA.
You can trade stock options contracts commission-free through Webull, although you still have to pay the modest FINRA fee that comes to a fraction of a cent per contract. Also, options exchanges charge $0.02915 per contract, while the Options Clearing Corp. (OCC) charges a $0.02 fee per contract with a $55 maximum.
You can access commission-free trading in up to 32 cryptocurrencies through Webull. Available digital currencies include Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), DogeCoin (DOGE), Shiba Inu (SHIB) and Litecoin (LTC).
Is Webull Worth It?
Depending on your individual needs as a trader or investor, Webull could definitely be well worthwhile, especially if you do not want to trade forex, municipal and agency bonds, T-Bills and Notes or mutual funds that the online broker does not offer a transaction service in.
As an added bonus to sweeten the deal, if you open a Webull account and deposit a minimum of $100, you can also receive up to 5 free shares of stock with a value of $27 — $9,600. Webull also offers all clients three-month complimentary access to Nasdaq TotalView, a premium data feed featuring Level II Advance quotes. After the initial three-month trial period, you will then have the option to continue the service for $1.99 per month.
Since Webull and Robinhood began offering their commission-free brokerage services, many other brokerages, including full-service brokers, began offering low- or zero-cost trading services. By October 2019, some long-established brokerage firms, including Charles Schwab, E-TRADE and TD Ameritrade, announced that they would eliminate trading fees in response to Webull and other commission-free brokers. Benzinga offers insights and reviews on these and other brokers offering similar products and services as Webull, so check out the list provided below to compare Webull with these brokers.
Frequently Asked Questions
Is Webull really free?
With the exception of some very minor regulatory fees from FINRA and the OCC, you can trade U.S.-listed stocks, ETFs, options and selected cryptocurrencies commission-free.
Does Webull have hidden fees?
All charges and extra fees that apply are listed in detail on Webull’s website. A notable service that Webull charges fees for is making wire deposits and withdrawals.
About Jay and Julie Hawk
During her financial career, Julie developed world-class expertise in technical analysis, including Elliott Wave Theory, and was deeply involved in initiating research into automated trading and trading signal systems. As a member of the San Francisco Writers’ Guild, Julie regularly wrote trade strategies, educational material, market commentary, foreign exchange newsletters, reports, articles and press releases. In addition, Julie was interviewed for various financial markets magazines and news wires in her professional capacity as a forex and derivatives expert. Since retiring from working at banks, Julie has been writing and editing books and articles about financial markets for companies like Benzinga, as well as trading forex online and mentoring other traders as part of TheFXperts’ financial team.
In addition to trading stock index, forex and commodity futures and options professionally on exchange floors, Jay also has experience trading stocks and options for private investors and trading forex online for his own account. He has also developed extensive experience in performing and using fundamental economic and corporate analysis to inform his trading and investment activities. Jay is also an expert financial writer with particular expertise in reviewing online brokers and investor services.