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You make some interesting points about incentives. Robinhood obviously doesn’t make money off of transactions, so they have to make it somewhere else. There’s t
by kaycebasques 8y ago
You make some interesting points about incentives. Robinhood obviously doesn’t make money off of transactions, so they have to make it somewhere else. There’s the premium memberships, and I believe others have mentioned that they make money off of the cash that sits in your account (not sure how that works or if it’s true). In the latter case, DRIP would be directly opposed to their business model, since the dividends that would otherwise sit in your account are being funneled into a share of some sort, instead.
- nimish 8y agoThey would sweep the cash into an interest-bearing account, and simply pocket the interest.
- kaycebasques 8y agoThat's what I figured, but I was wondering what kinds of rules are in place around what kind of interest-bearing accounts they can park the cash in.
- pgwhalen 8y agoIt’s not entirely true that robinhood doesn’t make money on transactions, given that they receive payment for order flow.
- kaycebasques 8y agoCan you expand on how this works? What is "order flow" and who is paying them for it?
- humbleMouse 8y agoIf they're smart they are also just simply taking the opposite of all their user's bets, and pocketing the winnings. Statistically speaking most people's options bets expire worthless. All robinhood has to do is take the opposite bet and they are printing money.