The race to zero in endless online brokerage-fee war already has been won

[sle]

Considering they raised $176 million in venture financing to get that whole thing operational, Robinhood can certainly continue the free trading model for quite a while. But it will be interesting to see if their tune changes when that pile of borrowed cash starts dwindling down and the pressure to make profits like a real brokerage kicks in, especially when the inevitable market downturn happens and all the millennial mobile-phone traders start getting their asses handed to them.

Well, the money comes in payments for flow, obviously. In the more volatile markets that flow will be worth even more.

 

[sss12]

You just know this is going to end badly down the line

 

[sss12]

Millennials with 5k trading off their phone. Now let them borrow 50% w/ leverage....ending badly may turn out to be a major understatement.

 

[sss12]

Well, the money comes in payments for flow, obviously. In the more volatile markets that flow will be worth even more.

@sle....totally understand the lending model (huge push at the wire houses) but is payment for flow enough to sustain an on going brokerage with all the current regulatory costs, etc ? Thanks

 

[sle]

@sle....totally understand the lending model (huge push at the wire houses) but is payment for flow enough to sustain an on going brokerage with all the current regulatory costs, etc ? Thanks

Margin and other stuff is nice, but not enough. What really makes the mint is that HFT firms pay them to route their orders to them (aka as "pay for flow").

Here is their SEC Rule 606 Report Disclosure, last page has the details of how much they get paid for orders:
https://d2ue93q3u507c2.cloudfront.net/assets/robinhood/legal/RHF PFO Disclosure.pdf

 

[sss12]

Margin and other stuff is nice, but not enough. What really makes the mint is that HFT firms pay them to route their orders to them (aka as "pay for flow").

Amazing that with all the bs about transparancy, etc a business model can run off behind the scene order flow. Guess there is nothing wrong with it as long as it is fully disclosed.

 

[sle]

Amazing that with all the bs about transparancy, etc a business model can run off behind the scene order flow. Guess there is nothing wrong with it as long as it is fully disclosed.

LOL. They are transparent all right of course, on the web site they never mention it outright:
https://support.robinhood.com/hc/en-us/articles/202853769-How-Robinhood-Makes-Money

 

[sss12]

Margin and other stuff is nice, but not enough. What really makes the mint is that HFT firms pay them to route their orders to them (aka as "pay for flow").

Here is their SEC Rule 606 Report Disclosure, last page has the details of how much they get paid for orders:
https://d2ue93q3u507c2.cloudfront.net/assets/robinhood/legal/RHF PFO Disclosure.pdf

Thanks for info, didn't know it was so profitable. "100% of orders undirected". What ! People trading off their phone aren't routing their orders ! LOL

 

[sss12]

LOL. They are transparent all right of course, on the web site they never mention it outright:
https://support.robinhood.com/hc/en-us/articles/202853769-How-Robinhood-Makes-Money

Really not mentioned at all.

 

[sss12]

Thanks for info, didn't know it was so profitable. "100% of orders undirected". What ! People trading off their phone aren't routing their orders ! LOL

@sle....so if HFT was curbed or regulated it would severely hinder this brokerage model ?