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Robinhood’s big gamble

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Re: Robinhood’s big gamble

#91

Post by TuringNYC »

theturtletalks wrote: post #80
TuringNYC wrote: post #66

Earlier quoted context omitted.

As a Schwab customer, I can confidently note there are many outages, especially on volatile market days. Sometimes, you have no idea if an order went through. With e-trade you get a sub-second push notification for trade confirmations, but with Schwab those push notifications come minutes or hours later. Meanwhile, if the website is down, you have no idea what exposure you have.

Yes but are those outages linked to specific stocks/crypto or happen randomly? RH had a major outage on one of the busiest trading days and people were upset but quickly forgiving. What's happened recently is not the same.

They dont happen randomly, they happen on high-volatility and high-volume days. Days where I want to re-balance my portfolio, or hedge. They happen at the worst times.

Taking a guess as an Engineer, they seem like load issues. Because page response times degrade from 2s, to 10s, to 30s, to timeouts.

Re: Robinhood’s big gamble

#92

Post by md_ »

ullevaal wrote: post #67

I think democratising asset investments is a worthwhile goal. The gamifying and the fact that RobinHood makes it money from trades does lead to some strained incentives, where most people would probably be better of maximising their tax advantaged pension contributions or setting or forgetting an index fund savings plan. However, I think also direct access to small and free to stock picks is generally good, so hopefu…

But statistically speaking it empirically isn't. Piketty, as mentioned by Tenev in the article, does indeed point out that one of the reasons return on capital is higher for the wealthy is because of access to lower-cost asset management and higher-return esoteric investments that the rest of us don't enjoy, but it's absurd to suggest (as Tenev does) that this is materially changed by bringing the cost of retail stock purchases from $4 down to $0.

Re: Robinhood’s big gamble

#93

Post by CarelessExpert »

kortilla wrote: post #90
CarelessExpert wrote: post #78

Earlier quoted context omitted.

> A lot of this critique is aimed at RH's interface/app because it is substantially better than the existing brokerages still using websites from the 1990s Wow... you really think the criticism is just because RH is better? What, is it jealousy or something? Please. This isn't the case of someone being picked on by a schoolyard bully. RH is in the highly regulated, highly consequential consumer fintech space, and the…

> But to claim RH is the target of SEC investigations simply because they're good? Come on. You make it sound like this is outlandish, but it happens nearly every time a disruptive player comes into a heavily regulated market full of old players. It is much easier to cry foul than to deal with the fact that the competition just got hard.

I guess that explains the SEC settlement where RH paid a large fine for deliberately misrepresenting their use of PFOF (though, as always, they didn't admit to wrongdoing... classic SEC!) I'm sure they're totally squeaky clean aside from that and it's all just a Big Finance conspiracy...

Re: Robinhood’s big gamble

#94

Post by kortilla »

sniperjzp wrote: post #32
sithlord wrote: post #10

Earlier quoted context omitted.

Although robinhood's app was pretty revolutionary, I think their real "innovation" was removing the cost of trades, basically forced the entire market to remove that. Before, it would cost 4.99+ to execute a trade, so if you were not buying significant amounts that could EASILY eat up a lot of profits.

It’s looks like free but it isn’t, RH makes money by selling trading requests to high frequency trading firms like Citadel, which buy/sell before the actual order in a better position so they can earn a penny from selling to or buying from you. The more transactions, the more they earn. - https://fortune.com/2020/07/08/robinhood-makes-millions-sell...

No, you don’t understand how that works. Citadel wants the retail order flow because it’s a huge pool filled with uninformed investors. They can actually offer you better spreads because on average you have no edge.

It’s similar to a casino offering free hotel rooms to people who play blackjack but who do not know how to card count. They even offer 3/2 on blackjack instead of 6/5.

Re: Robinhood’s big gamble

#95

Post by moshmosh »

dcolkitt wrote: post #24
MR4D wrote: post #5

Both. But then again, Hedge funds for rich people also encourage risky behavior (leveraging up their models, as imperfect as they are from time to time is definitely risky).

The basis of US securities law is that rich people ("accredited investors") know enough to be responsible to take risks. Whereas poor people are too stupid to make risky investments without turning into degenerate gamblers. A lot of debates about financial regulation basically come down to whether this is a good principle or not. Too many times, both sides are arguing at cross purposes, because one implicitly assumes…

Should be easy enough to look up what was happening that motivated those rules in the first place, for anyone who cares about them enough to consider removing them.

I tend to find "argument from reality" more compelling than arguments based on feeling, ideology, guesses about why people support a position, or reasoning from some moral axioms like one is completing mathematical proofs, personally. Possibly there were no major problems without those rules and it would be fine to remove them. Possibly a bunch of people were being significantly hurt with no recourse. Which was it?

Re: Robinhood’s big gamble

#96

Post by zachrip »

shubik22 wrote: post #38

Last time I checked on Robinhood (and maybe they've changed it since then), when you want to buy options on their app, their UI gives you two options: "I think the stock is going to go up" and "I think the stock is going to go down." Say what you will about "democratizing" finance, but even if you think enabling retail investors to buy options is a laudable goal, surely they should at least know what a "put" and a "c…

Making things easier to understand does not mean the person doesn't understand it. Just because adults struggle to understand common core math, doesn't mean kids aren't just as capable of solving an equation. Options don't need to be confusing and I actually find RH's educational material and examples pretty good to get a basic understanding of how they work.

Re: Robinhood’s big gamble

#97

Post by MangoCoffee »

one good thing that Robinhood did is eliminated the commission fee and now every broker have remove it.

i have a Scottrade/td ameritrade account, it was the lowest commission at the time ($7 per trade) when i open the account and now there is no commission fee anymore.

Re: Robinhood’s big gamble

#98

Post by nullspace »

CarelessExpert wrote: post #78
Someone1234 wrote: post #21

I have a Schwab brokerage account, until recently I could trade OTCs and can still trade warrants and futures. These are riskier securities than common stock. None of which is possible on RH as far as I know. When I created my Schwab account I received and was offered no specific training, and largely learned how to trade on YT, Investopedia, and articles. My point is this: RH has become the media's favorite whipping…

> A lot of this critique is aimed at RH's interface/app because it is substantially better than the existing brokerages still using websites from the 1990s Wow... you really think the criticism is just because RH is better? What, is it jealousy or something? Please. This isn't the case of someone being picked on by a schoolyard bully. RH is in the highly regulated, highly consequential consumer fintech space, and the…

> they are clearly gamifying trading. > If you want to make the claim RH isn't gamifying trading and therefore the criticisms are off base, please, I invite you to do so.

I have used RobinHood just a little bit, and it's not my main brokerage. However, I take issue with your phrasing. You start with the premise that whatever it is that RobinHood is doing is bad, it's impossible to argue against this where you are standing.

I hate the app that my main brokerage provides, but it was even worse before RobinHood existed. When I bought my first set of shares on RH, I was amazed by easy it was, and how well designed the UI was. IIRC, it is also super easy to find information on the stock that you're trading, so it's not like they are making the UI dumb.

I have read criticisms like how they make buying a stock seem inconsequential, but that's frankly pretty absurd to me. Do they need to make their UI flow less smooth, or give some big warning that people are dealing with real money?

If there are any parts of their app which encourages gambling, I agree it should be removed, but the actual criticisms I read are things like "they use bright flashy lights like slot machines" which seems very unconvincing.

Re: Robinhood’s big gamble

#99

Post by md_ »

emteycz wrote: post #58
pfisch wrote: post #18

Earlier quoted context omitted.

There have been brokers like that for at least 15 years. Zecco was doing it back in like 2006.

Yeah, it is standard in Europe for at least the whole last decade.

Note that it's illegal in the UK and being scrutinized in the EU: https://www.ft.com/content/3254a7c5-3c9b-468c-9ed4-a324f5e42....

Re: Robinhood’s big gamble

#100

Post by radicality »

TuringNYC wrote: post #66
SmellTheGlove wrote: post #41

Earlier quoted context omitted.

Schwab doesn't have outages during sell-offs of very visible investments, though. Hasn't Robinhood hit the rocks pretty hard during GME and DOGE sell-offs recently? The reason I won't use them is because I don't think I'm their customer - whoever is paying for the order flow is, and I don't trust their platform to be available in the middle of turbulence. EDIT: I get it - Schwab also had visible outages. Sorry for th…

As a Schwab customer, I can confidently note there are many outages, especially on volatile market days. Sometimes, you have no idea if an order went through. With e-trade you get a sub-second push notification for trade confirmations, but with Schwab those push notifications come minutes or hours later. Meanwhile, if the website is down, you have no idea what exposure you have.

I recommend you try out StreetSmartEdge for Schwab. While the UI is definitely Windows95-like, it's been reliable. The Schwab website + mobile app are not very good though.
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