Robinhood sells their order flow to the likes of Citadel, Virtu, etc.. These are called "internalizers" and they will often "Pay for Order Flow" or pfof. pfof f

Robinhood sells their order flow to the likes of Citadel, Virtu, etc.. These are called "internalizers" and they will often "Pay for Order Flow" or pfof. pfof flow is certainly profitable, because its "retail" and bi-directional. But it's not THAT profitable. For the big guys, it might be a few $10s of millions of dollars in revenue/years. But that revenue is significantly defrayed by the cost to purchase the flow - which is easily in the $10s of millions/year as well. Net net, its still a drop in the bucket compared to money being made in other strategies. Typically, these pfof arrangements require price improvement from the bid-ask. So the retail guy benefits a negligible amount on their trade (1/10th of a penny for example). This may be good for the retail guys in aggregate. There is also some immediacy to an order getting filled (also a requirement) that may not be there if the internalizers didnt exist. Robinhood's valuation comes from the net interest (borrowing short and lending long) and from the upsell of services. https://news.ycombinator.com/item?id=20276551 https://news.ycombinator.com/item?id=20276551 << refer to the excellent article and discussion here about how brokerages make money. Where attention should be turned is whether RobinHood is investing or gambling. More money is lost punting on the markets than through any arrangements to hi-freq guys.