Robinhood raises $323M at a $7.6B valuation • Hacker News Board

Re: Robinhood raises $323M at a $7.6B valuation

#21

Post by mattferderer » Mon, Jul 22, 2019, 6:48 PM UTC

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders?

This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue.

I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a much longer time to process. Though I imagine most small investors are not to concerned with either.

Re: Robinhood raises $323M at a $7.6B valuation

#22

Post by almost_usual » Mon, Jul 22, 2019, 6:50 PM UTC

elliekelly wrote: post #13

almost_usual wrote: post #10

Earlier quoted context omitted.

It's everyone's right to shoot themselves in the foot with dumb financial decisions. Robinhood isn't doing anything egregious here, they're only reducing friction and fees. I've used the app sparingly in the past with "fun money" but haven't done serious investing with it.

> It's everyone's right to shoot themselves in the foot with dumb financial decisions. The industry regulations would indicate otherwise. Generally, the “dumber” the money, the more regulatory protections that will apply. At their core, financial regulators are consumer protection entities.

Nothing is stopping anyone from putting their life savings into a legal dumb investment. Regulators and the government sure won't stop you from liquidating your 401k early. At some point common sense comes into play and you need to be smart with your money.

Re: Robinhood raises $323M at a $7.6B valuation

#23

Post by [deleted] » Mon, Jul 22, 2019, 6:51 PM UTC

mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

[deleted]

Re: Robinhood raises $323M at a $7.6B valuation

#24

Post by LanceH » Mon, Jul 22, 2019, 6:52 PM UTC

elliekelly wrote: post #13

almost_usual wrote: post #10

Earlier quoted context omitted.

It's everyone's right to shoot themselves in the foot with dumb financial decisions. Robinhood isn't doing anything egregious here, they're only reducing friction and fees. I've used the app sparingly in the past with "fun money" but haven't done serious investing with it.

> It's everyone's right to shoot themselves in the foot with dumb financial decisions. The industry regulations would indicate otherwise. Generally, the “dumber” the money, the more regulatory protections that will apply. At their core, financial regulators are consumer protection entities.

How is robinhood any different than all the other online brokers, except that they charge less?

Re: Robinhood raises $323M at a $7.6B valuation

#25

Post by bduerst » Mon, Jul 22, 2019, 6:52 PM UTC

elliekelly wrote: post #13

almost_usual wrote: post #10

Earlier quoted context omitted.

It's everyone's right to shoot themselves in the foot with dumb financial decisions. Robinhood isn't doing anything egregious here, they're only reducing friction and fees. I've used the app sparingly in the past with "fun money" but haven't done serious investing with it.

> It's everyone's right to shoot themselves in the foot with dumb financial decisions. The industry regulations would indicate otherwise. Generally, the “dumber” the money, the more regulatory protections that will apply. At their core, financial regulators are consumer protection entities.

Not really - the regulations are more or less in place to try to soften the impact of the dumb decisions (when they do happen), not to remove the freedom to make said dumb decisions.

Re: Robinhood raises $323M at a $7.6B valuation

#26

Post by benj111 » Mon, Jul 22, 2019, 6:55 PM UTC

mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

Its market makers generally rather than HFT. Essentially they (market makers) agree to buy stock that you want to sell than they sell it to someone else. Problem is if the market moves against them, you could be a hedge fund manager that knows something they don't.

Robin hood customers don't really know anything, their trading is fairly random, so a market maker can be confident that if they buy the shares, the Robin hood customer doesn't know something they don't, that is worth something to them, and allows them to offer tighter spreads.

Re: Robinhood raises $323M at a $7.6B valuation

#27

Post by gringoDan » Mon, Jul 22, 2019, 6:55 PM UTC

mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

This is a great article from patio11 that explains the general process, though not for Robinhood specifically: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

Re: Robinhood raises $323M at a $7.6B valuation

#28

Post by claytonjy » Mon, Jul 22, 2019, 7:00 PM UTC

mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

I'll add Matt Levine's insightful take here [0], which delves a bit into the "deal for order flow" controversy, and also makes the unique claim that for Robinhood to engage in this is very much in line with "taking from the rich and giving to the poor", because it does guarantee price improvement for RH users.

[0] https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i...

Re: Robinhood raises $323M at a $7.6B valuation

#29

Post by moose314 » Mon, Jul 22, 2019, 7:02 PM UTC

mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

The other commenters answered your first question about the sale of flow to HFT firms.

Regarding your second question, I wouldn't recommend trading a lot of size on Robinhood, or using market order in general, but brokerages that charge commissions do not necessarily offer better execution than Robinhood, many of them still route your flow to an HFT firm or have less than stellar order routing systems.

Re: Robinhood raises $323M at a $7.6B valuation

#30

Post by throwaway5752 » Mon, Jul 22, 2019, 7:06 PM UTC

AznHisoka wrote: post #9

I've been using Robinhood for the past year, and I hope they add basic features such as: - The ability to short a stock, which I still can't believe isn't available. - Price Alerts Everything else is gravy, IMO, especially if they keep the same basic, sleek interface, which I actually like.

Is there a way to allow shorts without having to manage margin and having to carry risk on the balance sheet? They have to deal with two counterparties (you, and whomever is lending you the shares). I am not sure how they could economically offer free short trades.