From what I know all regulated stock brokers are not allowed to use their investor's cash for any personal investments. The cash accounts of the customers must be 100% segregated from the brokers' own cash accounts.
Yet many brokers started paying around 4% interest rates on deposits. They need to 99% use the customer's free cash for investments and earn more than 4% in order to pay such high interest rates - literally banks don't pay such interest rates on deposits! Why is this playing with customers money allowed, as it obviously carries risks and why are the users not informed about this change?
Examples of two such brokers are Etoro and IBRK.
[link] [comments] https://www.reddit.com/r/stocks/comments/15ibz5i/how_are_stock_brokers_earning_money_on_deposits/
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