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They answer this themselves - https://support.robinhood.com/hc/en-us/articles/202853769-How-Robinhood-Makes-Money https://support.robinhood.com/hc/en-us/articl

by mpd 8y ago

They answer this themselves - https://support.robinhood.com/hc/en-us/articles/202853769-How-Robinhood-Makes-Money https://support.robinhood.com/hc/en-us/articles/202853769-Ho...

tomrod 8y ago
> How does Robinhood make money? > With Robinhood Gold, you get up to 2x your buying power and access to after hours trading for as little as $6 per month. This is the only product Robinhood charges you for, and is completely optional. Trading is still commission free. > Additionally, Robinhood earns revenue by collecting interest on the cash and securities in Robinhood accounts, much like a bank collects interest on cash deposits. They are selling Robinhood Gold's extra features, but I bet they make much more on the interest in deposits. If I recall this was their initial path to profitization.
- paulpauper 8y ago
  Margin trading..the real money-maker. Charge clients 8%/year for a loan that costs you 3%.
- ericd 8y ago
  Do they mention that they're also selling your order flow?
stygiansonic 8y ago
Interesting that they don't mention payment for order flow. From what I've read, that's major way in which they make income. Note that most (almost all?) retail brokerages accept payment for order flow, i.e. getting paid to direct their order flow to certain firms for order execution. For example, these are the firms that TD Ameritrade receives payment for order flow from: https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD2054.pdf https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD...
- stygiansonic 8y ago
  Replying to instead of editing my original comment, for posterity: From this article, it appears that they do not currently take payments for order flow: Originally, Robinhood planned to make money off of order flows – a common tactic used by discount brokerages in the 1990s to generate revenue. According to the company's FAQ, Robinhood backpedaled on the idea because it executes orders through a clearing partner and, as a result, receives little to no payment for order flow. The company is willing to return to its original plan in the future if it receives order flows directly or begins to generate a lot of revenue from them. Definitely surprised by this; I assume that if they did take payment for order flow, that they would be required to disclose this due to some SEC rules, so I'll take it at face value. https://www.investopedia.com/articles/active-trading/020515/how-robinhood-makes-money.asp https://www.investopedia.com/articles/active-trading/020515/...
  - stygiansonic 8y ago
    Another update: Actually, they do take payment for order flow, and here's the relevant disclosure: https://brokerage-static.s3.amazonaws.com/assets/robinhood/legal/RHF%20PFO%20Disclosure.pdf https://brokerage-static.s3.amazonaws.com/assets/robinhood/l... Apex Clearing Corporation – Robinhood receives payment from Apex Clearing Corporation for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00008 per dollar of executed trade value for order flow in the first quarter 2018. Citadel Execution Services – Robinhood receives payment from Citadel Execution Services for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018. Two Sigma Securities, LLC – Robinhood receives payment from Two Sigma Securities, LLC for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018. Wolverine Securities, LLC – Robinhood receives payment from Wolverine Securities, LLC for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018.

by mpd 8y ago

They answer this themselves - https://support.robinhood.com/hc/en-us/articles/202853769-How-Robinhood-Makes-Money https://support.robinhood.com/hc/en-us/articles/202853769-Ho...

tomrod 8y ago

> How does Robinhood make money? > With Robinhood Gold, you get up to 2x your buying power and access to after hours trading for as little as $6 per month. This is the only product Robinhood charges you for, and is completely optional. Trading is still commission free. > Additionally, Robinhood earns revenue by collecting interest on the cash and securities in Robinhood accounts, much like a bank collects interest on cash deposits. They are selling Robinhood Gold's extra features, but I bet they make much more on the interest in deposits. If I recall this was their initial path to profitization.

paulpauper 8y ago
Margin trading..the real money-maker. Charge clients 8%/year for a loan that costs you 3%.
ericd 8y ago
Do they mention that they're also selling your order flow?

stygiansonic 8y ago

Interesting that they don't mention payment for order flow. From what I've read, that's major way in which they make income. Note that most (almost all?) retail brokerages accept payment for order flow, i.e. getting paid to direct their order flow to certain firms for order execution. For example, these are the firms that TD Ameritrade receives payment for order flow from: https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD2054.pdf https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD...

stygiansonic 8y ago
Replying to instead of editing my original comment, for posterity: From this article, it appears that they do not currently take payments for order flow: Originally, Robinhood planned to make money off of order flows – a common tactic used by discount brokerages in the 1990s to generate revenue. According to the company's FAQ, Robinhood backpedaled on the idea because it executes orders through a clearing partner and, as a result, receives little to no payment for order flow. The company is willing to return to its original plan in the future if it receives order flows directly or begins to generate a lot of revenue from them. Definitely surprised by this; I assume that if they did take payment for order flow, that they would be required to disclose this due to some SEC rules, so I'll take it at face value. https://www.investopedia.com/articles/active-trading/020515/how-robinhood-makes-money.asp https://www.investopedia.com/articles/active-trading/020515/...
- stygiansonic 8y ago
  Another update: Actually, they do take payment for order flow, and here's the relevant disclosure: https://brokerage-static.s3.amazonaws.com/assets/robinhood/legal/RHF%20PFO%20Disclosure.pdf https://brokerage-static.s3.amazonaws.com/assets/robinhood/l... Apex Clearing Corporation – Robinhood receives payment from Apex Clearing Corporation for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00008 per dollar of executed trade value for order flow in the first quarter 2018. Citadel Execution Services – Robinhood receives payment from Citadel Execution Services for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018. Two Sigma Securities, LLC – Robinhood receives payment from Two Sigma Securities, LLC for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018. Wolverine Securities, LLC – Robinhood receives payment from Wolverine Securities, LLC for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018.