In a number of different ways, the main one being the difference between the bid-offer spread.
If the FTSE is quoted 4200 - 4202 the 2 ticks is normally profit as there will be buyers and sellers at both levels, hopefully at the same time.
Plus the brokers don't usually pay interest on client money. So if you have £5,000 on deposit they'll swipe the interest received, and yes that is legal.
Is it right? I'm in two minds, but the way to handle the situation is to never have a large cash balance on deposit. Make sure this is in a separate bank account and can be withdrawn immediately using a debit card. Then, if your broker needs money it can be sent within 10 minutes.
The other way the brokers make a profit, but it's not guaranteed, is to take the opposite position to their customers. So as you go long they take the short position. This can pay great dividends but it has also lost them a fair amount of money in the past as well.
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