During the pandemic, stock trading by individual investors soared. Meanwhile, major brokers such as Charles Schwab and E-Trade stopped charging commission fees on stock trading. Commission fees used to be a major source of revenue for brokers. Why do the brokers allow for commission-free trading and thus give up a major source of revenue?

1) The government wants to give individual investors a break during the pandemic. It subsidizes the brokers if they stop charing commission fees. These subsidies can help compensate the lost profits from commissions.

2) From the perspective of social responsibilities, the brokers feel it is a right thing to do, especially during a pandemic. The better public image can help boost the brokers' stock prices and compensate the lost profits from commisions.

3) Zero commision can attract more investors and thus more cash deposits. For the unused cash sitting in investors' accounts, the brokers can make money by paying a small interest on the cash while lending it at a higher rate, just like what traditonal banks do. The brokers can also lend the stocks in investors' portfolios to other customers and charge lending fees to make a profit. These additional profits can help compensate the lost profits from commissions.

4) Zero commision can attract more investors and boost trading. The brokers can make a profit by extending margin loans to investors' stock trading. These additional profits can help compensate the lost profits from commissions.

Which combination of the above statements is correct?

A) 3 and 4

B) 1 and 2

C) 2 and 4

D) 1 and 3

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