The Commission Era
For most of the history of retail investing in the United States, brokers charged explicit commissions. In the deregulated commission era after 1975, discount brokers like Schwab charged lower commissions than full-service firms, but commissions were still a visible cost. By the 2010s, discount commissions had fallen to approximately $4.95–$9.99 per trade.
Robinhood's Disruption
Robinhood launched in 2013 with a genuinely zero-commission model, funding itself through PFOF and other mechanisms. The app attracted millions of users — particularly younger investors — by eliminating commissions. Robinhood's growth put competitive pressure on established discount brokers that still charged commissions.
The 2019 Commission Elimination
In October 2019, Charles Schwab announced elimination of equity trading commissions. Within days, TD Ameritrade, E*Trade, Fidelity, and most other major discount brokers followed. The commission-elimination wave transformed the business model of retail brokerage almost overnight. PFOF, which Robinhood had pioneered at scale, became the dominant revenue model across the industry.
Consequences of Zero-Commission
The elimination of commissions dramatically increased retail trading activity. More investors traded more frequently because the explicit cost of each trade was zero. But the hidden cost — inferior execution through PFOF — remained. The net effect on investor outcomes is disputed: some argue that the increase in investor participation outweighs execution quality costs; others argue that PFOF-based routing imposes net costs on active retail traders.