7 ms·

The no commission model RH is providing is awesome and if they found a way to sustain that business model, great. The amount they have saved me (an avg trader w

The no commission model RH is providing is awesome and if they found a way to sustain that business model, great. The amount they have saved me (an avg trader with 25-50K) is well worth them selling my trade data to other firms. Sometimes their system is a bit glitchy. I'm sure as time goes by things will get tightened up. I mostly trade derivatives. If I open a 4 legged trade with 400 contracts that would cost me $300 in commissions on my old broker (TD Ameritrade) to open and an additional $300 to close it. Totally free with RH.

cwkoss 7y ago
Be sure to use limit orders! It feels like the execution price of their market orders can be looser than expected at times.
- yding 7y ago
  Doubly true if it's outside market hours. Unlike every other broker Robinhood doesn't (always) warn you when the markets are closed. I've had fills come in dollars off the last trade simply because the market order was placed before or after hours.
  - remote_phone 7y ago
    Most places I’ve seen won’t allow you to place market orders after hours, only limit orders.
    - astura 7y ago
      Fidelity let's you do it, they just warn you.
- TaupeRanger 7y ago
  Yes. It's amazing how many people don't know how to use limit orders, though entirely unsurprising since RH is a very beginner friendly platform.
  - yding 7y ago
    Robinhood also makes it harder to use limit orders than other brokers. I suspect it's because they receive more payment for order flow when it's a market order.
    - ericd 7y ago
      Wow, that's an extremely immoral dark pattern if true.
arcticbull 7y ago
They're selling your trades not your trade data. They sell the orders you place to HFT firms which arbitrage them and kick back a commission to Robinhood to fund their business. It kinda costs you, actually, you just don't see it. [1] With low trade volumes/order sizes you may end up ahead but I don't have data to back that up. [1] https://seekingalpha.com/article/4205379-robinhood-making-millions-selling-millennial-customers-high-frequency-traders https://seekingalpha.com/article/4205379-robinhood-making-mi...
- tylerhou 7y ago
  > It kinda costs you, actually, you just don't see it. Except not: see Matt Levine's explanation: https://www.bloomberg.com/opinion/articles/2018-10-16/carl-icahn-wants-to-fight-dell-again https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i... The conclusion: > So by selling its customers’ orders to market makers, Robinhood is actually stealing from two sets of “the rich”: Rich market makers like Citadel are paying it directly for the orders, while rich hedge-fund managers are getting worse execution on public stock exchanges so that Robinhood customers can get better executions off those exchanges. Big institutions are paying to subsidize free trades for Robinhood’s customers. It feels pretty Robin-Hood-y! If I were Robinhood I would advertise that!
  - manigandham 7y ago
    A market maker will never buy orders without making a profit. What they pay RH is nothing compared to what they make on the spreads.
    - tptacek 7y ago
      The profits MMs take here aren't zero sum between you and the MM, because there are other participants in the market. An MM can profitably quote a more generous spread to a retail trader, because retail order flow isn't going to wipe out their book and expose them to inventory risk. Essentially: you are cheaper to make a market for than a giant fund is, and you, Citadel, and Robinhood can split the savings.
manigandham 7y ago
Nothing is ever free. Robinhood sells order flow, meaning your trades are executed by a real market maker but with slower fills, larger spreads and more restrictions on trades.
- tptacek 7y ago
  Most retail brokerages sell order flow to internalizers, so if you're paying fees to trade, you're probably not getting anything back for that money.
  - manigandham 7y ago
    Sure, there's only a few companies that control all the flow but paying fees usually results in smaller spreads and faster execution. It also seems to result in better software and support. Maybe not everyone needs it, RH is good if you just buy and hold, but I wouldn't say fees are for nothing.
    - tptacek 7y ago
      I don't understand why you believe paying fees "usually" results in smaller spreads. Most of the brokerages you pay trading fees to are doing what Robinhood does, because retail order flow is made to be internalized, and firms like Citadel do a better job of it --- for customers --- than the firms that run the brokerages do; the job of a typical brokerage is to make a pretty web UI, keep some servers running, staff a bunch of brick-and-mortar locations, and answer the phones, and the job of actually executing trades is specialized in a different direction. More likely, the firm you're paying trading fees to is handing your order off to an internalizer, getting rebated for it, and pocketing both the rebate and the trade fee.
      - manigandham 7y ago
        It's from my experience and I've heard the same from many others. Maybe better spread is from better speed, and maybe the speed is a result of better software platform. The fees are also negotiable though, and responsive support is good to have and helped when I needed it. If it was that simple then I find it strange that these brokers don't offer free starter accounts to new users to compete against Robinhood. They must know something we don't about the real value of the company and how much competition they're adding.

cwkoss 7y ago

Be sure to use limit orders! It feels like the execution price of their market orders can be looser than expected at times.

yding 7y ago
Doubly true if it's outside market hours. Unlike every other broker Robinhood doesn't (always) warn you when the markets are closed. I've had fills come in dollars off the last trade simply because the market order was placed before or after hours.
- remote_phone 7y ago
  Most places I’ve seen won’t allow you to place market orders after hours, only limit orders.
  - astura 7y ago
    Fidelity let's you do it, they just warn you.
TaupeRanger 7y ago
Yes. It's amazing how many people don't know how to use limit orders, though entirely unsurprising since RH is a very beginner friendly platform.
- yding 7y ago
  Robinhood also makes it harder to use limit orders than other brokers. I suspect it's because they receive more payment for order flow when it's a market order.
  - ericd 7y ago
    Wow, that's an extremely immoral dark pattern if true.

arcticbull 7y ago

They're selling your trades not your trade data. They sell the orders you place to HFT firms which arbitrage them and kick back a commission to Robinhood to fund their business. It kinda costs you, actually, you just don't see it. [1] With low trade volumes/order sizes you may end up ahead but I don't have data to back that up. [1] https://seekingalpha.com/article/4205379-robinhood-making-millions-selling-millennial-customers-high-frequency-traders https://seekingalpha.com/article/4205379-robinhood-making-mi...

tylerhou 7y ago
> It kinda costs you, actually, you just don't see it. Except not: see Matt Levine's explanation: https://www.bloomberg.com/opinion/articles/2018-10-16/carl-icahn-wants-to-fight-dell-again https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i... The conclusion: > So by selling its customers’ orders to market makers, Robinhood is actually stealing from two sets of “the rich”: Rich market makers like Citadel are paying it directly for the orders, while rich hedge-fund managers are getting worse execution on public stock exchanges so that Robinhood customers can get better executions off those exchanges. Big institutions are paying to subsidize free trades for Robinhood’s customers. It feels pretty Robin-Hood-y! If I were Robinhood I would advertise that!
- manigandham 7y ago
  A market maker will never buy orders without making a profit. What they pay RH is nothing compared to what they make on the spreads.
  - tptacek 7y ago
    The profits MMs take here aren't zero sum between you and the MM, because there are other participants in the market. An MM can profitably quote a more generous spread to a retail trader, because retail order flow isn't going to wipe out their book and expose them to inventory risk. Essentially: you are cheaper to make a market for than a giant fund is, and you, Citadel, and Robinhood can split the savings.

manigandham 7y ago

Nothing is ever free. Robinhood sells order flow, meaning your trades are executed by a real market maker but with slower fills, larger spreads and more restrictions on trades.

tptacek 7y ago
Most retail brokerages sell order flow to internalizers, so if you're paying fees to trade, you're probably not getting anything back for that money.
- manigandham 7y ago
  Sure, there's only a few companies that control all the flow but paying fees usually results in smaller spreads and faster execution. It also seems to result in better software and support. Maybe not everyone needs it, RH is good if you just buy and hold, but I wouldn't say fees are for nothing.
  - tptacek 7y ago
    I don't understand why you believe paying fees "usually" results in smaller spreads. Most of the brokerages you pay trading fees to are doing what Robinhood does, because retail order flow is made to be internalized, and firms like Citadel do a better job of it --- for customers --- than the firms that run the brokerages do; the job of a typical brokerage is to make a pretty web UI, keep some servers running, staff a bunch of brick-and-mortar locations, and answer the phones, and the job of actually executing trades is specialized in a different direction. More likely, the firm you're paying trading fees to is handing your order off to an internalizer, getting rebated for it, and pocketing both the rebate and the trade fee.
    - manigandham 7y ago
      It's from my experience and I've heard the same from many others. Maybe better spread is from better speed, and maybe the speed is a result of better software platform. The fees are also negotiable though, and responsive support is good to have and helped when I needed it. If it was that simple then I find it strange that these brokers don't offer free starter accounts to new users to compete against Robinhood. They must know something we don't about the real value of the company and how much competition they're adding.