Is it legal for a stock broker to use client's idle money to generate interest and enjoy the benefit without sharing it with its clients?

Quoted from Forex.com.bd-Editorial External answer — Personal Finance Stack Exchange Author: Jay Source score (net votes, not local likes): 5 Original post: https://money.stackexchange.com/a/154202 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Is it legal? Yes. This is called "making a profit". The basic principle behind it is how every business in a free market works: You buy something for $X and then you resell it to a customer for $X+something. The difference is your gross profit, from which you pay your expenses, pay your employees, and if you're lucky have something left over for yourself. Banks are in the business of loaning money. So they borrow money for some low interest rate and then loan it out at a higher interest rate. The difference is called the "spread". Stock brokers used to make money by charging their clients a fee for each trade. But with the arrival of discount brokers, those fees have been whittled down to somewhere between peanuts and zero. So how to make money today? One way is to invest the cash balance in a client's account and keep all or most of the profits on that. This is called "float". A client deposits, say, $1000 in his account, and then a couple of days later he uses that $1000 to buy a stock. In those few days the broker can invest or loan the $1000 and make a little money. If the client leaves a little spare cash for a long period, the broker can make more from it. That's typically not a lot per client but if your clients are mostly self-directing trades on the Internet then your costs per client are low. And if you have many many clients, making a few dollars a year from each one adds up.

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