Brokers offering free trading can count on enhanced supervision in Europe. According to McGuinness, the business model of such free brokers could be in breach of European rules.
If no or only very low transaction costs are charged, the money has to be earned elsewhere, and this could be done by sharing the flow of trade with market makers, and this could be contrary to the rules that brokers should operate in the best interests of their customers.
“We will judge whether the current rules are sufficient,” quoted Bloomberg McGuinness, Commissioner for financial services.
