3 ms·

AIUI they're just doing a margin account that charges a fixed interest for a certain level of maximum lent cash (subject to normal margin limits on top). For $1

by bdonlan 10y ago

AIUI they're just doing a margin account that charges a fixed interest for a certain level of maximum lent cash (subject to normal margin limits on top). For $1k _maximum_ loan at $6/mo that works out to around 7.2% interest, which is fairly normal - but you're getting a raw deal if you don't borrow all of it, since you'll pay this interest even with zero dollars lent.

lewisl9029 10y ago
Wow. Thanks for clearing that up. That's a pretty novel (and shady) way to obfuscate real margin interest rates. It honestly wouldn't surprise me if we discover Robinhood marks up the spreads in their stock quotes to charge customers hidden commissions. I'm personally planning on going with Schwab for my long term investing when I move to the US in a few months. They have a pretty good selection of commission free ETFs (SCHB has a lower expense ratio than even VTI at 0.03 vs 0.05), so if I stick with those I can get unlimited commission free trades with a much more reputable broker. And you can't beat the convenience of being able to do all your banking with your brokerage account. I wish they also did Forex though. Going to miss those $1-2 Forex trades I had with my Canadian Interactive Brokers account. If Interactive Brokers starts offering banking products I'll probably be tempted back.
- encoderer 10y ago
  Re marking up the spread: That is against the law and not really possible the way the market works (market forces push down spreads bc there is value to liq providers to capture order flow. Brokers have to display best quote). You are guaranteed a crack at the best bid/offer. See: reg NMS
  - lewisl9029 10y ago
    Thanks for the correction. The practice definitely sounds shady enough to be outlawed, but the finance industry has countless similarly shady practices that are constantly being abused because they lie in legal gray areas. Glad to know this is not one of them.
    - encoderer 10y ago
      I mean, Theranos, so on more thought, YMMV!

by bdonlan 10y ago

lewisl9029 10y ago

Wow. Thanks for clearing that up. That's a pretty novel (and shady) way to obfuscate real margin interest rates. It honestly wouldn't surprise me if we discover Robinhood marks up the spreads in their stock quotes to charge customers hidden commissions. I'm personally planning on going with Schwab for my long term investing when I move to the US in a few months. They have a pretty good selection of commission free ETFs (SCHB has a lower expense ratio than even VTI at 0.03 vs 0.05), so if I stick with those I can get unlimited commission free trades with a much more reputable broker. And you can't beat the convenience of being able to do all your banking with your brokerage account. I wish they also did Forex though. Going to miss those $1-2 Forex trades I had with my Canadian Interactive Brokers account. If Interactive Brokers starts offering banking products I'll probably be tempted back.

encoderer 10y ago
Re marking up the spread: That is against the law and not really possible the way the market works (market forces push down spreads bc there is value to liq providers to capture order flow. Brokers have to display best quote). You are guaranteed a crack at the best bid/offer. See: reg NMS
- lewisl9029 10y ago
  Thanks for the correction. The practice definitely sounds shady enough to be outlawed, but the finance industry has countless similarly shady practices that are constantly being abused because they lie in legal gray areas. Glad to know this is not one of them.
  - encoderer 10y ago
    I mean, Theranos, so on more thought, YMMV!