Somewhere in your brokerage account sits cash — between trades, from dividends, waiting. A “cash sweep” is what the platform does with it overnight: sweeps it to partner banks or money funds. It sounds like plumbing. It’s actually one of the industry’s largest quiet revenue engines, and occasionally the difference between insured and not.
How the sweep works
Your idle cash is automatically moved (“swept”) into a program — typically deposit accounts at a network of partner banks. The banks pay interest on those deposits; the platform passes some of it to you and keeps the rest. That kept portion is the sweep spread, and in high-rate years it has rivaled or exceeded headline fees as a revenue source at major platforms (we flag it in our Platform Reports whenever the ADV discloses it).
The two questions that matter
What rate reaches you? Some platforms pass through most of the interest as a selling point; others pay near-zero while earning full freight on your float. The gap between what your cash earns and what it could earn in a money-market fund is a fee you’re paying without seeing a line item. Which protection applies? Cash swept into partner banks generally carries FDIC coverage through those banks (pass-through, subject to conditions and per-bank limits); cash sitting at the broker or in a money fund is SIPC-territory instead (the difference). The disclosures name the program banks and the mechanics — worth five minutes before parking meaningful cash.
The takeaway
Sweeps are legitimate and universal; unexamined sweeps are how “free” platforms get paid by you anyway. Check your platform’s current sweep rate against a money-market alternative once a year, and know which insurance regime your idle cash actually sleeps under. If a platform won’t say clearly, that’s your answer — and a Verifier scan plus its ADV brochure (how to read one) usually says it for them.