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Robinhood stock trading app confirms $110M raise at $1.3B valuation

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Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#121

Post by tomp »

morsch wrote: post #77
tomp wrote: post #17

Earlier quoted context omitted.

No, they didn't. It was more of a "non-denial". > Robinhood also earns money from rebates its gets for directing its order flow to broker dealers, though Bhatt insists “We do not sell data to anyone. We have never sold data to anyone. We just do not do that.” There have been misconceptions that Robinhood sells high-frequency traders its data to help them trade against the startup’s customers. But Bhatt says “The rule…

How would that not directly contradict "We do not sell data to anyone." ?

> Robinhood also earns money from rebates its gets for directing its order flow to broker dealers

So they're selling some data (as opposed to running directly on an exchange, without any intermediaries). Or maybe not "selling" in the strict sense (I give you data, you give me money), but in an indirect way (I give you data, and you give me discount on your other services).

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#122

Post by nolok »

lend000 wrote: post #115
AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

Wouldn't want to enable people to make their own decisions with their money, would we? The fact that you have to make a paid account to use leverage (whereas you can trade indefinitely for free) is deterrent enough for most people who do not already actively manage their investments. I think Robinhood is doing a great service -- I just wish they would expose a better API.

Unless I misunderstood him, he's not complaining that people can make their own decisions with their money, aka that anyone can use this service even if they're not well versed in that field, he's complaining that Robinhood entire business model is based on pushing the very users who don't know how to use it in a sane way, to do it anyway. That will be the company's lifeline, as its way to make money.

I can see the benefit in making it easier for people to get access to things that are often hidden behind layer of complexity and "need an in", but I can also see the perversity of building a business where your money making system is "put debt on people who don't quite know what they're getting into". The point is not that they allow it, it's that they have a direct incentive to make it happen as much as possible.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#123

Post by AndrewKemendo »

lend000 wrote: post #115
AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

Wouldn't want to enable people to make their own decisions with their money, would we? The fact that you have to make a paid account to use leverage (whereas you can trade indefinitely for free) is deterrent enough for most people who do not already actively manage their investments. I think Robinhood is doing a great service -- I just wish they would expose a better API.

Except it's credit, not their own money, so your naiive "how people spend their money has no consequences" attitude, doesn't hold water. That's the whole point.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#124

Post by harryh »

chollida1 wrote: post #11
jessriedel wrote: post #3

> Robinhood also earns money from rebates its gets for directing its order flow to broker dealers, though Bhatt insists “We do not sell data to anyone. We have never sold data to anyone. We just do not do that.” Just so everyone knows, order flow from unsophisticated investors is considered a valuable resource because, when filling it, you know that you're more informed than the person trading against you.

I don't think that's a very good way of putting it. I'd say its more correct to say orders from retail investors are valuable because: 1) They tend to be a relatively equal number of buys and sells. This is figurative manna from heaven for market makers 2) They don't mind crossing the spread, also a gift for market makers. 3) They can't really move the spread and probably least importantly...... 4) they aren't tradin…

#1 is largely because of #4

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#125

Post by spelunker »

pembrook wrote: post #110

Enticing millenials to "trade" individual stocks is quite possibly the most anti- Robinhood thing I can think of. The only thing more ironic would be to encourage them to take on margin...which as it turns out is literally Robinhood's business model. 99% of users on the platform will ulimately end up participating in a direct transfer of their own wealth to a more sophisticated trader or algo (i.e. The banks and hedg…

Trading is how brokers make money. It shouldn't surprise you that this is Robinhood's business model.

I totally agree with your investment strategy, and you can do that on Robinhood, by the way.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#126

Post by geofft »

lend000 wrote: post #115
AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

Wouldn't want to enable people to make their own decisions with their money, would we? The fact that you have to make a paid account to use leverage (whereas you can trade indefinitely for free) is deterrent enough for most people who do not already actively manage their investments. I think Robinhood is doing a great service -- I just wish they would expose a better API.

> Wouldn't want to enable people to make their own decisions with their money, would we?

As a blanket statement? No, we don't. Two reasons why:

1. "Make their own decision" is an extremely inaccurate phrasing. Unsophisticated investors do not have enough information to properly evaluate a decision, and are therefore unduly influenced by companies wanting to take advantage of them.

2. There's a cost to society from people who take risks that have negative expected value and then expect society to help them. Of course, society could just refuse to help them, but find that society works better when certain support structures (e.g., the ability to discharge debts in bankruptcy) exist, and it's very hard to distinguish people who "really" need the support structure and those whose petard is their own. If social pressure or regulation can deter people from taking these risks, that's slightly unfortunate for the person who would have won the gamble, but very advantageous to the health of society as a whole.

Both reasons are also why outright gambling is regulated, why publicly-traded companies are subject to financial regulation, why we don't let people "make their own decisions" about raw milk, untested drugs, aircraft, etc. - there are strong incentives for the people selling you that product to lie to you by omission in the hope of influencing your decision to be profitable to them.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#127

Post by [deleted] »

tomp wrote: post #121
morsch wrote: post #77

Earlier quoted context omitted.

How would that not directly contradict "We do not sell data to anyone." ?

> Robinhood also earns money from rebates its gets for directing its order flow to broker dealers So they're selling some data (as opposed to running directly on an exchange, without any intermediaries). Or maybe not "selling" in the strict sense (I give you data, you give me money), but in an indirect way (I give you data, and you give me discount on your other services).

[deleted]

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#128

Post by pfarnsworth »

eugeniub wrote: post #78
austenallred wrote: post #70

Earlier quoted context omitted.

Eh I don't consider it a new credit vehicle, margin trading is available in every trading platform. It doesn't make a huge difference for Robinhood; they'll issue a margin call if you're undercapitalized, so the likelihood you would lose any of Robinhood's money is very low. As for the investors, the percentage rate is very reasonable; given standard market conditions you'd make good money using robinhood gold and pu…

Yes margin trading is available elsewhere but only on Robinhood is it so easy. Setting it up on Scottrade or what have you is difficult and has a lot of hoops to run through. On your phone it really feels like "not a big deal", so a lot more young, inexperienced ordinary people can get sucked into it.

You sound like someone who has never set up a margin account. General margin accounts are almost no questions, and varying levels of options trading only ask you questions like "how many years have you traded options", with no verification. There's basically 0 barrier to entry except for having money to trade.

The only difference is that Robinhood is charging a subscription for access to margin whereas other brokerages do it for free.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#129

Post by nommm-nommm »

doctorbellario wrote: post #99
problems wrote: post #28

Earlier quoted context omitted.

Depends what you want to do, I'm about 98% in plain old, boring index-tracking ETFs. But sometimes I want to take a bit of money to make some stupid bet. Yes, to gamble. And for that purpose, often having the leverage is a good thing. The way I see it, the bets are much more entertaining than those at casinos and with better odds. Maybe it's just me, but I find casinos incredibly boring, but gambling on the market ca…

What are returns like on "boring index-tracking ETFs"?

http://performance.morningstar.com/funds/etf/total-returns.a...

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#130

Post by linuxkerneldev »

AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

> so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong?

Not really different than what's currently available and which by the way, is heavily regulated as is the service that Robinhood appears to be offering.

From their FAQ https://support.robinhood.com/hc/en-us/articles/213262686-Ro... :

You can use your full Gold buying power when buying stocks, though sometimes you can’t invest it all in one, single stock. Let’s explain. This is because US federal laws require all brokerages, including Robinhood, to have common-sense safeguards to prevent customers from losing too much money on a single, high-risk investment. Some examples where you can’t use your full Gold buying power on a single stock include leveraged ETFs (which are already leveraged) and newly-IPOed stocks (which can go up and down in price very quickly), stocks priced at less than $3.00 per share (these securities are at greater risk of getting de-listed), and others.

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