How does Robinhood make money? Simple... Volume

[bernorange 8,385]

Quote

Robinhood Markets Inc. has built a reputation on its origins in finance counterculture and a steal-from-the-rich ethos. But the firm, which offers no-fee stock trading, is making almost half its revenue from one of the most controversial practices on Wall Street.

The startup, valued at $5.6 billion, was bringing in more than 40 percent of its revenue earlier this year from selling its customers’ orders to high-frequency trading firms, or market makers, like Citadel Securities and Two Sigma Securities, according to three people with knowledge of the matter, who asked not to be identified because the details are private. Almost all retail brokerages employ the practice, called payment for order flow, but it’s an unlikely strategy for a company built on an anti-Wall Street message.

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Even so, the practice of selling to market makers has long attracted criticism from regulators and consumer advocates, who argue that it creates a conflict of interest where consumers can lose out. Citadel Securities and Two Sigma Securities declined to comment. 

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https://www.bloomberg.com/news/articles/2018-10-15/robinhood-gets-almost-half-its-revenue-in-controversial-bargain-with-high-speed-traders

That Bloomberg report doesn't expound upon the criticisms of the practice.  So what are they? 

[SuingToGetAMessageBoard? 3,861]

A+ thread title

[Parliament 14,561]

I’ve never heard of any of these guys. How die these “fast traders” like Wolverine and Sigma Two make money if they’re paying for the right to place an order for Robinhood? Arbitrage?

[happyfunball 481]

1 hour ago, bernorange said:

https://www.bloomberg.com/news/articles/2018-10-15/robinhood-gets-almost-half-its-revenue-in-controversial-bargain-with-high-speed-traders

That Bloomberg report doesn't expound upon the criticisms of the practice.  So what are they? 

Legal front running?

[happyfunball 481]

1 minute ago, Parliament said:

I’ve never heard of any of these guys. How die these “fast traders” like Wolverine and Sigma Two make money if they’re paying for the right to place an order for Robinhood? Arbitrage?

Picking up pennies on millions of trades adds up to serious coin

[bernorange 8,385]

2 minutes ago, happyfunball said:

Legal front running?

That's what I was assuming, but Bloomberg didn't spell it out and this isn't my bailiwick, so I thought I'd ask.

[Trey3216 15,450]

33 minutes ago, Parliament said:

I’ve never heard of any of these guys. How die these “fast traders” like Wolverine and Sigma Two make money if they’re paying for the right to place an order for Robinhood? Arbitrage?

RobinHood's orders don't process or execute instantaneously, so yes. Most of the orders on there are placed as market orders by inexperienced traders.  The sold orders can take minutes or hours to execute.  The investor is then out on wherever the price action may have moved to 

[Rusty Shackelford 414]

Quote

Almost all retail brokerages employ the practice, called payment for order flow, but it’s an unlikely strategy for a company built on an anti-Wall Street message.

So everyone else does it, but let's slam Robinhood because perception?

[TheYoungHorn 95]

Of course this is how they are making money. 

Did any one think any different? The HFT pay a bit to get access to guaranteed money on every single transaction they facilitate. 

Which, in some ways might be better than you paying a brokerage house a per transaction fee for them also to "sell" your trade to a match-making HFT. 

Either way, there is someone faster than you, and they are going to skim a bit off (rent-seeking FTW). 

 

[Capn81 396]

Picking up pennies on millions of trades adds up to serious coin

Yeah, they did it in Superman 3.

[miguelito 11,450]

Underrated movie, actually.

[TwiceHorn 31,991]

Penny-stealing criminal men.

[Parliament 14,561]

1 hour ago, TwiceHorn said:

Penny-stealing criminal men.

Something, something, Office Space

[Rusty Shackelford 414]

robinhood is fucking over everyone who tries to sell an option contract today:

https://status.robinhood.com/

[Rusty Shackelford 414]

Several robinhood users now posting on twitter that their account appears to have been deactivated, probably temporary but not good at all

[JimmyHoffa 1,188]

 

 

[Lobwedgephil 1,146]

33 minutes ago, Rusty Shackelford said:

Several robinhood users now posting on twitter that their account appears to have been deactivated, probably temporary but not good at all

My account is all good, but I am not selling options like mentioned above. 

[Rusty Shackelford 414]

I finally sold a contract, I just like to keep < $2k there, but thinking about pulling out completely. 

[Post Oak 20,551]

4 hours ago, Rusty Shackelford said:

I finally sold a contract, I just like to keep < $2k there, but thinking about pulling out completely. 

 

[gsoda3 3,358]

the robin hood orders being sold to citadel and 2 sig are probably being routed to their dark market algos.  they're probably taking anywhere between half a penny to 5 cents profit on every share they transact.  and that's just on stuff under $75.  higher priced names the margins are probably 3 cents to 45 cents on average.

[Rusty Shackelford 414]

45 minutes ago, Post Oak said:

 

never said it was my baller account, it's my play money and do stupid shit account.  Scratches my itch to trade daily.

[Lobwedgephil 1,146]

Apparently they are in the banking business now, offering free checking and savings accounts. Savings accounts has a pretty interesting 3% interest. 

 

https://techcrunch.com/2018/12/13/robinhood-free-checking-and-savings-accounts/

[El Diablo 4,232]

Men In Tights?

[Doc Reeves 6,434]

Damn. You know, this isn't a bad scam at this time in this particular political climate. 

[HRSchenker 2,331]

3% savings account is really tempting. I'm getting 2.25% from Ally right now but I enjoy the interface and security. As far as investing goes, I wouldn't even consider it. Too high of fees. I've been getting a nice return from VTI and that fee is 0.08% I believe

[immamac 44,200]

Good to know this isn't the only piece of shit website that goes down occasionally 

[clapclapclap 9,000]

^^^ Sheriff of Borkingham?

[bernorange 8,385]

Quote

For years, the website RobinTrack.net has been doing a great job of mining RobinHood's data to provide raw data and a visualization of which stocks the users of the retail brokerage have been holding and disposing of on a daily basis.

RobinTrack.net has been a wonderful way to keep an eye on exactly what stocks the bagholder crowd have been rushing into on a daily basis, providing insight into the hysteria of retail daytraders, allowing hedge funds to likely frontrun the data and providing opportunities for short sellers looking for ideas.

But those days appear to be all but over.

On Friday, CNBC reported that the brokerage will no longer display how many of its users hold a certain stock. In addition it is going to be taking down its public API data that allows other sites, like RobinTrack.net, to source its data for visualization and analysis purposes.

"The data has been used to show booms in retail stocks," a CNBC report said on Friday. "You guys know RobinTrack well. A lot of financial news outlets use it for reporting, including CNBC."
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Like its order flow, we're guessing "everything's for sale" at Robinhood and wouldn't be surprised if the brokerage creates a hedge fund "product" with this data moving forward.
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https://www.zerohedge.com/markets/days-tracking-robinhood-data-are-now-officially-over