Robinhood and Interactive Brokers Both Ride Retail Volume. Only One Earns on Idle Cash.

CBOE Global Markets (NYSEMKT: CBOE) reported record revenues in the second quarter of 2026, up 25% year over year. Earnings rose 50%. And a key driver was record trading volume. That's great for CBOE, but that same Wall Street enthusiasm has been helping discount brokers Robinhood (NASDAQ: HOOD) and Interactive Brokers (NASDAQ: IBKR).

Only, these discount brokers aren't going down the same path as businesses. Here's a key difference that may affect which discount broker you choose to buy.

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Direct competitors with slightly different models

Robinhood and Interactive Brokers are competitors. However, they are focused on different subsets of the market. Robinhood is looking to attract newer investors, while Interactive Brokers is targeting more experienced investors. Right now, each company is doing very well amid a long bull market and expanding trading opportunities for investors, including things like cryptocurrencies and prediction markets.

To put some numbers on it, Robinhood saw transaction-based revenues jump 44% year over year in the second quarter of 2026. Interactive Brokers' commission revenues increased 30%. That difference isn't shocking, since Robinhood customers are likely younger, which may make them more active traders and more attuned to hot trading themes, like prediction markets. However, there's a more important difference when you examine two other revenue sources.

Robinhood's interest income rose 9% year over year, and its "other" income increased 54%. Other income includes the revenue from its Gold subscriptions. By contrast, Interactive Brokers' interest income rose 23%, while its "other" income jumped 40%. Interactive Brokers does not offer a subscription service similar to Robinhood. However, Interactive Brokers does a lot more on the interest side, more aggressively supporting traders who use margin and paying attractive interest rates on idle cash (earning spread income). To put a specific number on that, Robinhood had interest income of $389 million, compared with roughly $1.06 billion for Interactive Brokers. That's a big difference.

The implications of the model differences

Margin loans and cash are clearly boosting Interactive Brokers' performance today. But there's a downside to consider. If there is a bear market and its customers reduce their margin debt, either by choice or due to margin calls, the company's interest income will begin to shrink. That could exacerbate the hit if a downturn also reduces trading volumes, thereby reducing transaction revenues.

To be fair, Robinhood wouldn't be immune to the impact of reduced trading volumes. However, its use of a subscription service could help protect some of the revenue it generates in the "other" category. Subscriptions tend to produce fairly resilient revenues. In a market downturn, that could make Robinhood's business more resilient than Interactive Brokers'.

There is the risk that the new investors Robinhood tends to target simply stop investing, which shouldn't be overlooked, as it could leave the company with fewer customers. However, it seems likely that Gold subscriptions are tied to the more experienced customers it serves. Those clients are likely to stick around through a downturn.

Which model wins?

There hasn't been a really deep bear market since the Great Recession, so it is hard to tell if Robinhood or Interactive Brokers has the better model. In fact, Interactive Brokers went public in 2007, at the start of that downturn, while Robinhood held its IPO in 2021, well after it was over. Those IPO dates make it difficult to use that downturn as a guidepost, as you could with a discount peer like Charles Schwab (NYSE: SCHW), which has been public for much longer.

That said, it is likely that Interactive Brokers' approach will lead to more volatility in its financial results. The good years will probably be really good, while the bad years could be really bad, as both transaction and interest revenues both dry up at the same time. For some, that may make Robinhood's attempt to build a subscription business a more attractive choice, even though the resilience of its subscription revenue stream has yet to be tested by a deep and prolonged market pullback.

Charles Schwab is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Interactive Brokers Group. The Motley Fool recommends Cboe Global Markets and Charles Schwab and recommends the following options: long January 2027 $43.75 calls on Interactive Brokers Group, short January 2027 $46.25 calls on Interactive Brokers Group, and short September 2026 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.