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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

#131

Post by metalliqaz »

harryh wrote: post #103
Leader2light wrote: post #21

I use Robinhood daily and love it. Low level traders could care less if HFT are making a penny off them. Also you can put limit orders....... No way I could trade the way I do and still make money if I was paying 7$ or more per trade. Crazy the industry can charge that much.

This is a good time to trot out that old tech company adage: if you aren't paying for the product, you are the product. How does Robinhood make money? By selling order flow to market makers. Why do market makers want Robinhood's order flow? Because Robinhood's customers are, collectively, unsophisticated investor with no particular knowledge about the future performance of a stock making them the perfect customers fo…

And why is that a bad thing? If I make a couple of $100 trades in a day and make $10, what do I care if the pros used me for liquidity? I believe the same would happen even if I was paying $7 at Fidelity to make the trades.

Not trying to be argumentative, just want to make sure I understand the conversation here.

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

#132

Post by pembrook »

spelunker wrote: post #125
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.

However the other online Brokers don't call themselves "Robinhood" and claim to be the champion of the little guy while simultaneously encouraging you into a strategy that has been proven to lose over the long run.

Use the advisor (robo or human) services of any of the top online brokers and they will recommend you put your money in index funds.

Also, putting together a "long term" portfolio of indexes at Robinhood assumes that Robinhood will be around offering free trades for the next 40 years. Otherwise you're looking at hefty capital gains taxes to transfer when they pivot or go belly up.

There once was a company called Zecco...

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

#133

Post by pfarnsworth »

harryh wrote: post #103
Leader2light wrote: post #21

I use Robinhood daily and love it. Low level traders could care less if HFT are making a penny off them. Also you can put limit orders....... No way I could trade the way I do and still make money if I was paying 7$ or more per trade. Crazy the industry can charge that much.

This is a good time to trot out that old tech company adage: if you aren't paying for the product, you are the product. How does Robinhood make money? By selling order flow to market makers. Why do market makers want Robinhood's order flow? Because Robinhood's customers are, collectively, unsophisticated investor with no particular knowledge about the future performance of a stock making them the perfect customers fo…

They are doing the exact same thing that other brokers do. The difference is they are trying to drive the trading fees down to zero and hope they can make up revenue on all the other avenues, like selling order flow. I don't know if that's a sustainable model or not, though. They need to deal with a lot of fraud associated with their platform which takes revenue from the top line.

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

#134

Post by icelancer »

harryh wrote: post #103
Leader2light wrote: post #21

I use Robinhood daily and love it. Low level traders could care less if HFT are making a penny off them. Also you can put limit orders....... No way I could trade the way I do and still make money if I was paying 7$ or more per trade. Crazy the industry can charge that much.

This is a good time to trot out that old tech company adage: if you aren't paying for the product, you are the product. How does Robinhood make money? By selling order flow to market makers. Why do market makers want Robinhood's order flow? Because Robinhood's customers are, collectively, unsophisticated investor with no particular knowledge about the future performance of a stock making them the perfect customers fo…

>By selling order flow to market makers

All the discount brokers do this.

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

#135

Post by harryh »

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).

I give you data, and you give me discount on your other services

That's not what rebate means in this context. It is, in fact, actual money.

Robinhood also isn't just giving someone data. They're sending order flow to various market makers. Not data about the orders but the actual flow in need of execution.

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

#136

Post by okreallywtf »

geofft wrote: post #126
lend000 wrote: post #115

Earlier quoted context omitted.

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 pe…

"Make your own decisions" and "choose what is right for you" are often euphemisms for "get thrown to the sharks" but give the illusion that you are really being given control over your own destiny by those who will likely take advantage of you.

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

#139

Post by harryh »

pfarnsworth wrote: post #133
harryh wrote: post #103

Earlier quoted context omitted.

This is a good time to trot out that old tech company adage: if you aren't paying for the product, you are the product. How does Robinhood make money? By selling order flow to market makers. Why do market makers want Robinhood's order flow? Because Robinhood's customers are, collectively, unsophisticated investor with no particular knowledge about the future performance of a stock making them the perfect customers fo…

They are doing the exact same thing that other brokers do. The difference is they are trying to drive the trading fees down to zero and hope they can make up revenue on all the other avenues, like selling order flow. I don't know if that's a sustainable model or not, though. They need to deal with a lot of fraud associated with their platform which takes revenue from the top line.

Indeed you are correct and I think that's great. I just think it makes sense for the retail customers who use Robin Hood (like the OP) to have the realization that they are the "unsophisticated investor" in this transaction. And hence, if they're trading multiple times a day, they are probably not making a great financial decision.

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

#140

Post by physguy1123 »

jessriedel wrote: post #112
chollida1 wrote: post #11

Earlier quoted context omitted.

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…

Can you quantify why you think 1-3 are more important than 4?

4 is the root cause of 1-3. By itself 4 doesn't mean much for a market maker, but the collective market behavior it results in (1-3) remove a lot of risk from market making against retail exclusively.
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