Unlocking the Power of Daily Average Revenue Trades (DARTs): A Modern Brokerage Metric Explained

Andy Smith, a Certified Financial Planner (CFP®), licensed realtor, and educator, brings over 35 years of extensive experience in personal finance, corporate finance, and real estate. Throughout his career, he has guided thousands of clients toward achieving their financial aspirations.

What Are Daily Average Revenue Trades (DARTs)?

Daily Average Revenue Trades (DARTs) serve as a vital metric within the brokerage sector, traditionally quantifying the average number of trades per day that generate commissions or fees. Since the rise of zero-commission trading in 2019, many brokerages have broadened the scope of DARTs to include commission-free trades, reflecting the evolving revenue models in the industry.

Key Highlights

• DARTs measure the average daily trades generating revenue in brokerage firms.
• Originally, DARTs focused solely on commission-earning trades.
• The zero-commission trend has prompted brokerages to redefine DARTs, with some maintaining traditional metrics and others adopting expanded definitions.
• In 2019, E*TRADE expanded its DART definition to encompass all trades generating payment for order flow, commissions, or fees.

Why DARTs Matter in Brokerage Performance

Analysts closely monitor DARTs as a barometer for brokerage revenue generation from commissions—a historically significant profit source, especially for discount brokers. Since commission earnings correlate directly with DART volume, rising DART figures often signal stronger quarterly earnings, while declines may indicate reduced profitability.

Similar to industry-specific performance metrics like same-store sales in retail or RevPAR in hospitality, DARTs provide insight into brokerage operational health and help stakeholders compare performance across firms.

Challenges with Commission-Free Trading

The shift toward zero-commission trading complicates the interpretation of DARTs. An increase in trade volume does not necessarily equate to higher profits if commissions per trade decrease. For example, a 50% increase in DARTs coupled with a 50% commission cut can result in lower overall commission revenue.

The proliferation of commission-free platforms, pioneered by Robinhood in 2014 and followed by major brokerages in 2019, challenges traditional DART metrics and demands new approaches to measuring brokerage success.

Different Approaches to Measuring DARTs

With zero-commission trades becoming standard, brokerages have adopted varying definitions of DARTs to better reflect their revenue streams.

Traditional DARTs

Charles Schwab, for instance, maintained the original DART definition until October 2019, leading to a sharp decline in reported DARTs after eliminating commissions. This approach risks rendering DARTs obsolete or less comparable across firms as commission-based revenue diminishes.

Proponents of the traditional definition argue that as commissions fade, brokerages will pivot to revenue from fees and services, making DARTs less relevant over time.

Expanded DARTs

Conversely, E*TRADE's expanded DART definition includes all trades that generate payment for order flow, commissions, or fees, encompassing zero-commission stock trades, ETF transactions, and certain mutual fund trades. Payment for order flow remains a crucial revenue component, making this broader DART metric a more accurate reflection of brokerage earnings.

The effectiveness of expanded DARTs hinges on the profitability of payment for order flow relative to traditional commissions, especially as other revenue sources face declines.

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