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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    Patrick McKenzie‏ @patio11 25 May 2019
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    Thinking of writing an essay on how brokerages make money since a) it comes up on HN a lot and the easy answer (commissions) is wrong and b) the revenue mix for different brokerages, even among discount brokerages, varies hugely.

    11:04 AM - 25 May 2019
    • 5 Retweets
    • 178 Likes
    • sol bergren Paulo Silveira timwee Ken ajinomoto GP Eric Schlakman Abdullahi Mahamed joshconstine Programmer
    14 replies 5 retweets 178 likes
      1. New conversation
      2. Patrick McKenzie‏ @patio11 25 May 2019
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        Charles Schwab, for example, runs a brokerage almost as a loss leader to have access to $100 billion (you read that right) in client deposits paying an average of 27 basis points (0.27%; you read that right) annually. Net interest revenue is 70% of their topline revenue.

        2 replies 1 retweet 72 likes
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      3. Patrick McKenzie‏ @patio11 25 May 2019
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        TDAmeritrade, by contrast, actually earns ~36% of their revenue by selling the thing that everyone thinks they are in business to sell. That is a high number among discount brokerages.

        2 replies 1 retweet 35 likes
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      4. Patrick McKenzie‏ @patio11 25 May 2019
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        (In related news, people's intuitions about how e.g. retail banks or SMB-focused banks or commercial banks make money are also generally not that great.)

        6 replies 2 retweets 29 likes
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      5. End of conversation
      1. New conversation
      2. Yoran Brondsema‏ @YoranBrondsema 25 May 2019
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        Replying to @patio11

        Does a summary fit in a tweet?

        1 reply 0 retweets 0 likes
      3. Patrick McKenzie‏ @patio11 25 May 2019
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        Replying to @YoranBrondsema

        A varying mix of net interest income, commissions (from users), payments from banks for cash management, debit card interchange, fees, fees from proprietary asset management products, fees from internalizers (payment for order flow), etc.

        2 replies 1 retweet 12 likes
      4. 1 more reply
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      2. Coach Tony‏ @tonystubblebine 25 May 2019
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        Replying to @patio11

        Would love to read this based on your tweets about it. Would $ and an editor help get it done? Better Programming on Medium could give you both. I think $500 is what we can offer.

        2 replies 0 retweets 2 likes
      3. Patrick McKenzie‏ @patio11 25 May 2019
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        Replying to @tonystubblebine

        Appreciate the offer, but going to pass. Feel obliged to mention: a substantial portion of my body of work is convincing technologists to charge appropriate rates, and mine would start two digits higher if I were hireable. Which kinda blows your model out, but my model not yours

        1 reply 0 retweets 8 likes
      4. 1 more reply
      1. Visakan Veerasamy‏ @visakanv 25 May 2019
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        Replying to @patio11

        @patio11: "thinking of writing an essay..." me:pic.twitter.com/4YcvNzFRmm

        0 replies 1 retweet 25 likes
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      1. Paul Reinheimer‏ @preinheimer 25 May 2019
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        Replying to @patio11

        Please do, it’s almost always easier to understand something once you understand how it makes money.

        0 replies 0 retweets 1 like
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      1. Jon Colverson‏ @JJC1138 25 May 2019
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        Replying to @patio11

        I'd be very interested in that. Been thinking about it because there's a relatively new discount brokerage here in Europe (DEGIRO) which seems dramatically cheaper than everyone else so I assume there's a novel business model at work.

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