6 ms·

As a user of the Robinhood brokerage for all of my "fun investment money" I'm a fan of this. I do wonder how the big banks are going to respond however as this

by SEJeff 8y ago

As a user of the Robinhood brokerage for all of my "fun investment money" I'm a fan of this. I do wonder how the big banks are going to respond however as this is blatantly a "shots fired" kind of event.

davio 8y ago
BOA interest rates will probably rocket up from .02% to .03% when the prime rate goes above 6%
- fizgig 8y ago
  I know, right? I'm soooo tempted to hoard $100k with BoA for that 20% extra bonus to their crappy interest rate.
  - tanderson92 8y ago
    You joke, but a lot of savvy people hoard $100k with BoA through their brokerage in the form of ETFs specifically for the bonuses to credit card rates (and the free equity trades).
    - fizgig 8y ago
      Yeah, I know. I'll probably roll over my 401k into an IRA at Merrill Edge for the free trades and 75% perk on their cash back cards. I was just highlighting the horrible rates that banks currently provide in the customer's favor even if you are a loyal patron holding a substantial (for the vast majority of people) sum of money.
elliekelly 8y ago
Oddly enough I suspect the result will be lobbying for stricter financial privacy regulations. Almost half of Robinhood's revenue is from selling data.[1] Big banks won't be able to compete on that front and most of the big players don't participate/make enough money on order flow sales that they'd miss it if it were prohibited. So the banks will do what they do best: lobby congress & regulators to legislate & regulate their competition away. Though in this case, I would argue that's in the best interest of the consumer. [1]https://www.bloomberg.com/news/articles/2018-10-15/robinhood-gets-almost-half-its-revenue-in-controversial-bargain-with-high-speed-traders https://www.bloomberg.com/news/articles/2018-10-15/robinhood...
- consumer451 8y ago
  From your link: > Almost all retail brokerages employ the practice
  - elliekelly 8y ago
    In options maybe, not in equities. Bank of America doesn't, Vanguard doesn't, none of the firms I've worked at do. Bernie Madoff basically invented the "strategy" and most firms aren't exactly looking to emulate him. The FSA (U.K. equivalent to the SEC) effectively banned the practice a few years ago (2010 maybe?) which curtailed the practice a lot. I'm not sure about other states but the Massachusetts AG's office started looking into it last year, too. Its essentially a kickback paid in exchange for information that allows the "smart money" institutional investors to front-run the "dumb money" retail investors.
    - SEJeff 8y ago
      This comment couldn't be further from the truth. You sound like you've read flash boys without reading the rebuttal that shows how it is entirely wrong. Here let me link it to you: https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-Frequency-ebook/dp/B00P0QI2M2 https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-... I used to work with Peter Kovac, the author of that book, and can personally vouch for his integrity. He's a really humble and stand up guy.
- kevin_thibedeau 8y ago
  You're data is already being sold when you spend so adding on your bank is just another drop in the bucket.
- SEJeff 8y ago
  I don't think this means what you think it means... Every single broker like Robinhood sells order flow to electronic trading firms. This flow is then executed faster due to improved market access. All of that to say that you're probably getting better execution because Robinhood wasn't stupid enough to try to go through some crappy broker or build their own order entry system. Also, the order data can not be mapped back to you. That simply isn't how the stock market works at all. Every single other broker (Schwab, Merril Lynch, etc) does this. Source: I work for one of those big market making electronic trading firms, the kind you try to demonize but fail fundamentally to understand.
tryptophan 8y ago
I bet they wont respond at all. Nobody keeps serious money(that banks would care about) in a checking account lol. This is just marketing to attract the millennial crowd and get them to gamble their money away on stocks(benefiting robinhood of-course).

by SEJeff 8y ago

davio 8y ago

BOA interest rates will probably rocket up from .02% to .03% when the prime rate goes above 6%

fizgig 8y ago
I know, right? I'm soooo tempted to hoard $100k with BoA for that 20% extra bonus to their crappy interest rate.
- tanderson92 8y ago
  You joke, but a lot of savvy people hoard $100k with BoA through their brokerage in the form of ETFs specifically for the bonuses to credit card rates (and the free equity trades).
  - fizgig 8y ago
    Yeah, I know. I'll probably roll over my 401k into an IRA at Merrill Edge for the free trades and 75% perk on their cash back cards. I was just highlighting the horrible rates that banks currently provide in the customer's favor even if you are a loyal patron holding a substantial (for the vast majority of people) sum of money.

elliekelly 8y ago

Oddly enough I suspect the result will be lobbying for stricter financial privacy regulations. Almost half of Robinhood's revenue is from selling data.[1] Big banks won't be able to compete on that front and most of the big players don't participate/make enough money on order flow sales that they'd miss it if it were prohibited. So the banks will do what they do best: lobby congress & regulators to legislate & regulate their competition away. Though in this case, I would argue that's in the best interest of the consumer. [1]https://www.bloomberg.com/news/articles/2018-10-15/robinhood-gets-almost-half-its-revenue-in-controversial-bargain-with-high-speed-traders https://www.bloomberg.com/news/articles/2018-10-15/robinhood...

consumer451 8y ago
From your link: > Almost all retail brokerages employ the practice
- elliekelly 8y ago
  In options maybe, not in equities. Bank of America doesn't, Vanguard doesn't, none of the firms I've worked at do. Bernie Madoff basically invented the "strategy" and most firms aren't exactly looking to emulate him. The FSA (U.K. equivalent to the SEC) effectively banned the practice a few years ago (2010 maybe?) which curtailed the practice a lot. I'm not sure about other states but the Massachusetts AG's office started looking into it last year, too. Its essentially a kickback paid in exchange for information that allows the "smart money" institutional investors to front-run the "dumb money" retail investors.
  - SEJeff 8y ago
    This comment couldn't be further from the truth. You sound like you've read flash boys without reading the rebuttal that shows how it is entirely wrong. Here let me link it to you: https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-Frequency-ebook/dp/B00P0QI2M2 https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-... I used to work with Peter Kovac, the author of that book, and can personally vouch for his integrity. He's a really humble and stand up guy.
kevin_thibedeau 8y ago
You're data is already being sold when you spend so adding on your bank is just another drop in the bucket.
SEJeff 8y ago
I don't think this means what you think it means... Every single broker like Robinhood sells order flow to electronic trading firms. This flow is then executed faster due to improved market access. All of that to say that you're probably getting better execution because Robinhood wasn't stupid enough to try to go through some crappy broker or build their own order entry system. Also, the order data can not be mapped back to you. That simply isn't how the stock market works at all. Every single other broker (Schwab, Merril Lynch, etc) does this. Source: I work for one of those big market making electronic trading firms, the kind you try to demonize but fail fundamentally to understand.

tryptophan 8y ago

I bet they wont respond at all. Nobody keeps serious money(that banks would care about) in a checking account lol. This is just marketing to attract the millennial crowd and get them to gamble their money away on stocks(benefiting robinhood of-course).