what's really dumb is the fact it takes 3 days for a trade to settle. why can't I buy $SPY and get my money immediately? it's 2021, jeez.
I agree, but that's an SEC rule and not something brokers can control.
Robinhood’s big gamble
101–110 of 156 posts
Re: Robinhood’s big gamble
#102Earlier 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…
> 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 sta…
> 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.
That's quite literally what gamifying is: providing the kind of visual rewards/stimulus, combined with an extremely low friction experience, that's specifically designed to work in concert to encourage engagement.
In the case of a slot machine, that means putting coins in the machine and pulling the lever.
In the case of Robinhood, that means executing trades.
Maybe you don't believe those features of Robinhood actually encourage trading, but frankly, the psychology around RH's design is pretty well understood both in the technology industry and the gambling industry. Hell, there's an entire booked (Hooked!) written about it.
> Do they need to make their UI flow less smooth, or give some big warning that people are dealing with real money?
Yes. Absolutely. Why would that be a problem?
Ostensibly RH's mission is to provide people with free access to the markets to "regular folks" (read: inexperienced traders).
That's not the same thing as encouraging day trading.
I don't see why features that discourage excessive trading (which is unquestionably an anti-pattern for a typical retail trader, and therefore is not in the best interest of the folks RH is supposedly trying to empower) would be a bad thing...
... except, of course, RH's revenue is specifically derived from high trading volume, so it's not in their financial interest.
Re: Robinhood’s big gamble
#103The thing I don't see mentioned in this thread is how incongruous Robinhood's image is (a professed goal of fighting inequality by giving the working classes access to the same return on capital as the wealthy enjoy) in relation to their business model. Say what you will about Wall St, but customers of traditional brokers tend to know what the brokers are in it for: the money. Robinhood's big product innovation might…
If you throw away all the pretense is it just the case that RH has a better business model compared to etrade, Schwab etc? They recognized that consumers prefer zero commission trades, a good UX smartphone app, and don't care about the fact that RH sells order flow?
All that other stuff is noise.
Re: Robinhood’s big gamble
#104Last 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…
It’s like a casino, not because there’s something wrong with it, but because of house advantage. And there’s actually not anything wrong with that. But there’s a reason Citadel pays so much for Robinhood orderflow. And that reason is options. People lifting offers with market orders creates massive opportunities to make markets.
The average Robinhood user mostly like doesn’t understand what a put/call is, much less what Black Scholes is, or how to trade around their gamma.
But I don’t think that’s a reason to stop anything. Trading is naturally self correcting: bad traders stop. If anything it says more about reconsidering gambling laws. Let adults spend their money how they see fit if it’s not infringing on someone else’s rights.
Re: Robinhood’s big gamble
#105I 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…
[deleted]
Re: Robinhood’s big gamble
#106Earlier quoted context omitted.
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... .
Yeah, another example of the "great" EU "helping" the people...
Re: Robinhood’s big gamble
#107The thing I don't see mentioned in this thread is how incongruous Robinhood's image is (a professed goal of fighting inequality by giving the working classes access to the same return on capital as the wealthy enjoy) in relation to their business model. Say what you will about Wall St, but customers of traditional brokers tend to know what the brokers are in it for: the money. Robinhood's big product innovation might…
If you throw away all the pretense is it just the case that RH has a better business model compared to etrade, Schwab etc? They recognized that consumers prefer zero commission trades, a good UX smartphone app, and don't care about the fact that RH sells order flow? All that other stuff is noise.
If I'm being candid, what bugs me about this kind of marketing is that I work for a Silicon Valley company which spends a lot of hot air on "doing what's right"—and I want it to be true.
So, for {altruistic, self-interested} reasons, I want to push back on the dilution of "doing good by doing well."
To directly answer your questions on Robinhood, though: I believe (with low confidence) that the big innovation is gamification. That's it. And I have trouble feeling like that's beneficial.
If Robinhood had gamified saving for retirement in a boring 3-fund portfolio with zero commission trades, I don't think we'd be having this conversation. But PFOF on once-a-month 401k inputs wouldn't be very good for their investors.
Re: Robinhood’s big gamble
#108Earlier quoted context omitted.
Note that it's illegal in the UK and being scrutinized in the EU: https://www.ft.com/content/3254a7c5-3c9b-468c-9ed4-a324f5e42... .
Yeah, another example of the "great" EU "helping" the people...
Agreed; it's disappointing that the UK beat them to banning it.
Re: Robinhood’s big gamble
#109Earlier quoted context omitted.
> 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 sta…
> 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. That's quite literally what gamifying is: providing the kind of visual rewards/stimulus, combined with an extremely low friction experience, that's specifically designed to work in concert to en…
>> Do they need to make their UI flow less smooth, or give some big warning that people are dealing with real money?
>Yes. Absolutely. Why would that be a problem?
Are you proposing that this warning can't be disabled or permanently dismissed? As an adult consumer I do NOT want this.
Re: Robinhood’s big gamble
#110I 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…
> RH has become the media's favorite whipping boy because retail trading has seen a spike in popularity Because they cant operate as a real brokerage as we saw with GameStop and manipulated the market as a result. I think that is the largest reason they are (rightfully) the whipping boy. They should not be allowed to be a trading platform because of that alone.
If "operate as a real brokerage" means that you must have $5B+ of cash tied up at the clearing house, that's a pretty stiff barrier for entry.
To be fair, I don't like RH. They are irresponsible, greedy and reckless. They have turned day trading into outright gambling - and quite frankly, if a gambling company gamified their UX the way RH did theirs, the gambling company execs would be rightfully raked over hot coals. Shitting on RH because they had to obey the clearing house rules is intellectual cowardice.
Disclosure: I work for a gambling company. And yes, I deal with compliance questions on an almost daily basis.