"Free" transactions are free because they're not immediate. The broker buys the share themselves and sells it to you at markup... ie: there is still a transaction fee, you just have no idea what it is.
Day traders use platforms that are optimized for speed and minimal fees, and that don't charge fees based on lot size.
What your suggestions is front running. This is illegal for stocks and most assets (not FX!). This will get a broker in hot water.
The more nuanced practice that brokers use to monetize is payment for order flow. They sell your security order flow to algorithmic trading shops that buy and sell the securities you want to trade.
You’re correct in that most retail orders never make it to a regulated exchange, but that may not always be a bad thing. There’s been studies showing that HFTs often match retail trades even when the market moves against them since they are better able to predict market changes and can still profit off the trades.
Right. They sell the order flow to the dark pool who then front runs the order. I haven't looked at this since like 2018 but last I checked the only major brokerage that didn't sell order flow was Interactive Brokers.
Is it execution or price? Iirc the broker cannot give you a worse price if it knows of a better one... But is the regulation that the price must actually result in an executed trade?
Generally speaking more volume is good. I’m happy I can buy/sell most of my stocks instantly and that I don’t pay execution fees. I don’t think most average traders operate on a horizon/scale that’s directly competing with institutional funds.
Day traders use platforms that are optimized for speed and minimal fees, and that don't charge fees based on lot size.