5 ms·

Robinhood walks a really fine line between a reputable broker and legalized gambling. There isn't much difference between Robinhood app and a casino app. I'm su

by zz865 5y ago

Robinhood walks a really fine line between a reputable broker and legalized gambling. There isn't much difference between Robinhood app and a casino app. I'm surprised they have been allowed to turn stock trading into a game.

MattGaiser 5y ago
People treating stocks as a game long preceded Robinhood.
- zz865 5y ago
  True but at least brokers didn't make it so easy to get margin or options and then have cute animations and other tech-inspired addictive features.
  - betterunix2 5y ago
    I had a margin account long before RH, back when I was living on a grad student's salary, along with options trading approval. Even the big brokerages with trillions in customer assets have been handing these things out like candy for a long time. All RH did was substantially reduce fees and make trading a little more exciting for unsophisticated "investors."
  - filoleg 5y ago
    >True but at least brokers didn't make it so easy to get margin or options They did. I personally tried (in addition to RH) WeBull and Fidelity. Both allowed me to access margin and options just as easily. The only difficulty I had with Fidelity was their atrocious UX (not just for options, but in every single aspect). >then have cute animations and other tech-inspired addictive features. Tech-inspired addictive features? Like which ones? The only "addictive" feature that RH has over Fidelity is UX that doesn't suck massively. Had to help a friend recently with something as simple as closing out a trade on Fidelity, and we spent 10-15 mins trying to figure out how to do it. This is a disgrace, given how basic and fundamental of an operation closing a trade is. Imagine if gmail has made it extremely difficult to reply to an email, by making you click through bajillion submenus and dropdowns to even get to the textbox. That's how bad it is.
  - MattGaiser 5y ago
    The first version of Options for Dummies was published in 2008. Robinhood was founded in 2013. So options have been reasonably mainstream for well before Robinhood too. So basically the thing left to blame them for is good UX.
missedthecue 5y ago
Seems like a difficult thing to regulate. "No using colors in your UI other than grey, white and black"
- tylersmith 5y ago
  Reminicent of California's anti-flavor approach to smoking prevention.
mullingitover 5y ago
Ultimately isn't everyone trading stocks without insider information gambling? You might have a 'system' for your trading strategy, but so do most serious gamblers.
- abfan1127 5y ago
  gambling is strictly chance (with the exception of Poker). While there is chance involved in any company's success, they can heavily influence it with decisions along the way. Intelligent traders learn about these decisions and invest. Dumb traders don't. Sometimes life lessons are learned the hard way.
- betterunix2 5y ago
  When someone buys shares of stock something real -- partial ownership of a company -- is being transferred from one person to another. Those shares mean something, and anyone can read the prospectus to see what exactly those shares mean. Companies pay dividends, buy back shares, and allow shareholders to vote on who will lead the company and what the company should do. When a company is bought by another company the shareholders are paid. In theory the shareholders might receive some proceedings from a bankruptcy proceeding (in practice this is uncommon since the creditors have to be paid first and usually bankruptcy happens when debts can no longer be paid in full). There is more than just random numbers involved. Equity prices may have a tenuous connection to reality, but there is some real-world basis for stock, bonds, and derivatives. That is what separates financial markets from casino games (which are purely random number games).
  - mullingitover 5y ago
    > Companies pay dividends, buy back shares, and allow shareholders to vote on who will lead the company and what the company should do. Minor nitpick: some companies do this. There are plenty that never issue dividends, don't sell voting shares, and don't do buybacks.
    - betterunix2 5y ago
vmception 5y ago
> Robinhood walks a really fine line between a reputable broker and legalized gambling. There isn't much difference between Robinhood app and a casino app. I'm surprised they have been allowed to turn stock trading into a game. Mostly because not everyone is bound by that distinction. Many people recognize that the need for there to be a difference between financial games is purely cultural or religious. Even the delineation between positive expected value games (buy and hold investing) and negative expected value games (table games at casinos) is not so binary with derivatives. The reason this discrepancy exists in the US is because states regulate casinos and property and the federal government regulates the subset of property that are deemed securities. But despite the supporting culture, the Federal government is actually quiet on gambling, except to maintain a prohibition on financial services helping transfer funds to online gambling, allowing states to maintain their monopolies. For me, it doesn't matter, I like to know the rules or lack thereof for whatever game I happen to be playing. For me, energy is better spent towards fixing structural issues, such as DTCC and antiquated mandates on long settlement times, which should be much shorter.
jaredeklee13 5y ago
That's half of it. The other half is that trading is "commission-free." While technically true, it belies the economics of payment for order flow which results in poor execution. Rather than pay in commissions, users pay in poor prices on the trade. It did catch up with them, but the headline marketing remains unchanged. https://www.sec.gov/news/press-release/2020-321 https://www.sec.gov/news/press-release/2020-321
- jldugger 5y ago
  When I opened my robinhood account, etrade was charging 6.95 per trade. I'm reasonably certain the loss in improvement over best public offer I'm losing or whatever is less than that. It's not "free" but the cost is way, way lower.
  - gruez 5y ago
    >I'm reasonably certain the loss in improvement over best public offer I'm losing or whatever is less than that. Actually your broker has to execute your order at a better or equal price than the NBBO. I'm presuming that's what you mean by "best public offer", because the price improvements that you get from market makers are definitely not public.
    - jldugger 5y ago
      Yes. National Best Bid / Offer. Aka, a best offer made to the general public. The argument is roughly that we're losing out on the price improvements that could have been if Robinhood's fulfillment partner weren't kicking money back to robinhood. But it doesn't hold much water for retail investors -- how much money needs to be trading hands in a given before the delta there is greater than 6.95?

by zz865 5y ago

MattGaiser 5y ago

People treating stocks as a game long preceded Robinhood.

zz865 5y ago
True but at least brokers didn't make it so easy to get margin or options and then have cute animations and other tech-inspired addictive features.
- betterunix2 5y ago
  I had a margin account long before RH, back when I was living on a grad student's salary, along with options trading approval. Even the big brokerages with trillions in customer assets have been handing these things out like candy for a long time. All RH did was substantially reduce fees and make trading a little more exciting for unsophisticated "investors."
- filoleg 5y ago
  >True but at least brokers didn't make it so easy to get margin or options They did. I personally tried (in addition to RH) WeBull and Fidelity. Both allowed me to access margin and options just as easily. The only difficulty I had with Fidelity was their atrocious UX (not just for options, but in every single aspect). >then have cute animations and other tech-inspired addictive features. Tech-inspired addictive features? Like which ones? The only "addictive" feature that RH has over Fidelity is UX that doesn't suck massively. Had to help a friend recently with something as simple as closing out a trade on Fidelity, and we spent 10-15 mins trying to figure out how to do it. This is a disgrace, given how basic and fundamental of an operation closing a trade is. Imagine if gmail has made it extremely difficult to reply to an email, by making you click through bajillion submenus and dropdowns to even get to the textbox. That's how bad it is.
- MattGaiser 5y ago
  The first version of Options for Dummies was published in 2008. Robinhood was founded in 2013. So options have been reasonably mainstream for well before Robinhood too. So basically the thing left to blame them for is good UX.

missedthecue 5y ago

Seems like a difficult thing to regulate. "No using colors in your UI other than grey, white and black"

tylersmith 5y ago
Reminicent of California's anti-flavor approach to smoking prevention.

mullingitover 5y ago

Ultimately isn't everyone trading stocks without insider information gambling? You might have a 'system' for your trading strategy, but so do most serious gamblers.

abfan1127 5y ago
gambling is strictly chance (with the exception of Poker). While there is chance involved in any company's success, they can heavily influence it with decisions along the way. Intelligent traders learn about these decisions and invest. Dumb traders don't. Sometimes life lessons are learned the hard way.
betterunix2 5y ago
When someone buys shares of stock something real -- partial ownership of a company -- is being transferred from one person to another. Those shares mean something, and anyone can read the prospectus to see what exactly those shares mean. Companies pay dividends, buy back shares, and allow shareholders to vote on who will lead the company and what the company should do. When a company is bought by another company the shareholders are paid. In theory the shareholders might receive some proceedings from a bankruptcy proceeding (in practice this is uncommon since the creditors have to be paid first and usually bankruptcy happens when debts can no longer be paid in full). There is more than just random numbers involved. Equity prices may have a tenuous connection to reality, but there is some real-world basis for stock, bonds, and derivatives. That is what separates financial markets from casino games (which are purely random number games).
- mullingitover 5y ago
  > Companies pay dividends, buy back shares, and allow shareholders to vote on who will lead the company and what the company should do. Minor nitpick: some companies do this. There are plenty that never issue dividends, don't sell voting shares, and don't do buybacks.
  - betterunix2 5y ago

vmception 5y ago

> Robinhood walks a really fine line between a reputable broker and legalized gambling. There isn't much difference between Robinhood app and a casino app. I'm surprised they have been allowed to turn stock trading into a game. Mostly because not everyone is bound by that distinction. Many people recognize that the need for there to be a difference between financial games is purely cultural or religious. Even the delineation between positive expected value games (buy and hold investing) and negative expected value games (table games at casinos) is not so binary with derivatives. The reason this discrepancy exists in the US is because states regulate casinos and property and the federal government regulates the subset of property that are deemed securities. But despite the supporting culture, the Federal government is actually quiet on gambling, except to maintain a prohibition on financial services helping transfer funds to online gambling, allowing states to maintain their monopolies. For me, it doesn't matter, I like to know the rules or lack thereof for whatever game I happen to be playing. For me, energy is better spent towards fixing structural issues, such as DTCC and antiquated mandates on long settlement times, which should be much shorter.

jaredeklee13 5y ago

That's half of it. The other half is that trading is "commission-free." While technically true, it belies the economics of payment for order flow which results in poor execution. Rather than pay in commissions, users pay in poor prices on the trade. It did catch up with them, but the headline marketing remains unchanged. https://www.sec.gov/news/press-release/2020-321 https://www.sec.gov/news/press-release/2020-321

jldugger 5y ago
When I opened my robinhood account, etrade was charging 6.95 per trade. I'm reasonably certain the loss in improvement over best public offer I'm losing or whatever is less than that. It's not "free" but the cost is way, way lower.
- gruez 5y ago
  >I'm reasonably certain the loss in improvement over best public offer I'm losing or whatever is less than that. Actually your broker has to execute your order at a better or equal price than the NBBO. I'm presuming that's what you mean by "best public offer", because the price improvements that you get from market makers are definitely not public.
  - jldugger 5y ago
    Yes. National Best Bid / Offer. Aka, a best offer made to the general public. The argument is roughly that we're losing out on the price improvements that could have been if Robinhood's fulfillment partner weren't kicking money back to robinhood. But it doesn't hold much water for retail investors -- how much money needs to be trading hands in a given before the delta there is greater than 6.95?