how-does-webull-make-money

How Does Webull Make Money?

Webull is an online trading platform, allowing users to trade stocks, options, and exchange-traded funds. It makes money through order flow (profit between bid-ask price). In late 2019, Webull strategically partnered with Nasdaq TotalView to give traders access to in-depth market data via two subscription options.  Margin trading is also available on the Webull platform. In addition, the company collects monthly interest on the loans it issues to traders. Webull also charges short selling fees if an investor wants to borrow shares of a company before selling them.

History of Webull

Webull is an online trading platform, allowing users to trade stocks, options, and exchange-traded funds.

Webull was founded by former Alibaba Group employee Wang Anquan in 2017 but headquartered in New York City. The company was initially funded by Fumi Technology, a Chinese company that Anquan founded a year earlier in 2016.

Early in the piece, Anquan had ambitions to legitimize his business by establishing a presence in North America. He subsequently hired Wall Street veteran Anthony Denier to serve as CEO. 

When the Webull service launched in 2017, it provided sophisticated charting tools to help traders make better decisions. However, Anquan saw the rise in popularity of investment platform Robinhood and pivoted accordingly. 

After securing millions from successive funding rounds, Webull purchased commercial television advertising slots to grow its user base quickly. It also partnered with influencers and offered free stock a sign-up incentive for new customers.

Webull now has a user base of over 2 million retail investors.

Webull revenue generation

Webull has a similar revenue generation model to many other online investment platforms.

Order flow payment

When users place an order on the Webull platform, the order is sent to a market maker who then compensates the company for deal flow. This can simply be defined as the rate at which the market maker receives investment offers.

Compensation is made possible through generating a profit on the bid-ask spread. In other words, the difference between the quoted rate for a given sale (bid) and buy (ask). Webull only earns a fraction of this profit, but revenue is more significant when one considers how many trades are executed on its platform daily.

Subscriptions

In late 2019, Webull strategically partnered with Nasdaq TotalView to give traders access to in-depth market data. 

There are two subscription options:

  • Level 1 – a freemium option including data on equities, indices, forex, futures, and data from over 100 stock exchanges.
  • Level 2 – a more detailed option enabling investors to better analyze the market depth of a single security. This level displays the 30 best bids and asks which can identify more strategic buying and selling opportunities. Webull offers this service for $1.99/month.

Margin trading

Margin trading is also available on the Webull platform. The company collects monthly interest on the loans it issues to traders.

Interest rates are governed by the debit balance as follows:

  • Up to $25,000 – 6.99%.
  • $25,000.01-$100,000 – 6.49%.
  • $100,000.01-$250,000 – 5.99%.
  • $250,000.01-$500,000 – 5.49%.
  • $500,000.01-$1,000,000 – 4.99%.
  • $1,000,000.01-$3,000,000 – 4.49%.
  • Over $3,000,000.01 – 3.99%.

Short selling fees

Webull also charges short selling fees if an investor wants to borrow shares of a company before selling them. Revenue generation here comes from interest fees the investor pays on the value of the borrowed shares while their position is open.

Short selling is only available to those with a balance exceeding $2,000. 

Key takeaways:

  • Webull is an online trading platform headquartered in New York City but majority-owned by the Chinese company Fumi Technology. It was founded in 2017 by Wang Anquan as a sophisticated chart trading platform.
  • Webull earns money from order flow like many similar platforms. A more unique offering is provided through a partnership with Nasdaq TotalView. This partnership gives traders access to detailed market depth analytics for a small monthly fee.
  • Webull also earns interest fees on margin trading and short selling. Fees are based on the amount of capital or stock borrowed.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"