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Robinhood S-1 IPO

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Re: Robinhood S-1 IPO

#241

Post by pclmulqdq »

FabHK wrote: post #223
vasco wrote: post #220

Earlier quoted context omitted.

Just like "no fee" money exchanges in airports with huge spreads. Same business but internet scale and with the new hype of investing.

Though, to be fair, Robinhood offers reasonably spreads. They must execute client orders at a price as good as or better than the national best bid offer, if I understand correctly (Reg NMS [1]). Now, the firms that buy that order flow offer better (tighter) prices, an improvement over the NBBO, and what Robinhood does is take a cut of that improvement. (Robinhood takes a larger cut than other brokers, fair enough, b…

Robinhood's spreads are much larger than many other brokerages because of the deals they make with order flow buyers. Yes, they are still at or better than NBBO, but many brokerages will give you price improvement on crossing orders down to near the midpoint price (unless you are very good at timing the market and already have a great price from crossing).

I did an A/B test of this, and found that RH was actually an outlier in terms of how bad your executions are.

Re: Robinhood S-1 IPO

#242

Post by adam_arthur »

kooshball wrote: post #236
adam_arthur wrote: post #225

Earlier quoted context omitted.

Pretty sure they're counting any crypto bought as revenue, which seems highly misleading. Are they counting any stock purchased as revenue too? I don't understand the justification for that accounting at all. The profit on any transaction for them is 0 dollars, unless they're skimming on spreads or frontrunning or something else scammy. Square does this as well, which is how they got "200%" revenue growth. Correct me…

you are absolutely wrong. honestly the s-1 is not that hard to read. here is it page 131. Key Components of our Results of Operations Revenues Transaction-based revenues Transaction-based revenues consist of amount earned from routing customer orders for options, equities and cryptocurrencies to market makers. When customers place orders for equities, options or cryptocurrencies on our platform, we route these orders…

Ok, so only Square does that then.

Re: Robinhood S-1 IPO

#243

Post by XIVMagnus »

mherdeg wrote: post #239

Robinhood closed my brokerage account after I did transferred out assets (via ACATS transfer, to get a signup bonus with another brokerage without realizing capital gains). A few months later I asked how to reopen the account, using the "reopen account" form in their app to generate a support ticket. Three weeks later they sent an email saying that my account was permanently closed and I should apply for a new accoun…

RH is basically shit. I immediately transferred out of RH during the whole GME craze when they froze trading

Re: Robinhood S-1 IPO

#244

Post by carnitine »

mister_pea wrote: post #222
starguide77 wrote: post #214

Earlier quoted context omitted.

When you say "It’s awful at order execution, so you get worst prices on things." What does "worst price" represent? How do you get a "Worst price" than anywhere else?

Robinhood sells to/executes orders through high frequency trading firms like Citadel and (I think) Two Sigma. Because Robinhood isn't connected directly to, say, the NYSE, these HFT firms essentially buy the security and sell it to you for a slightly higher price. TBF, other companies do this too; like, TD Ameritrade, Schwab and E*Trade.

No, HFT firms are obliged to meet the NBBO. They improve prices for retail investors because retail investors are generally safer to transact with.

Re: Robinhood S-1 IPO

#245

Post by [deleted] »

FabHK wrote: post #223
vasco wrote: post #220

Earlier quoted context omitted.

Just like "no fee" money exchanges in airports with huge spreads. Same business but internet scale and with the new hype of investing.

Though, to be fair, Robinhood offers reasonably spreads. They must execute client orders at a price as good as or better than the national best bid offer, if I understand correctly (Reg NMS [1]). Now, the firms that buy that order flow offer better (tighter) prices, an improvement over the NBBO, and what Robinhood does is take a cut of that improvement. (Robinhood takes a larger cut than other brokers, fair enough, b…

[deleted]

Re: Robinhood S-1 IPO

#246

Post by pie420 »

elliekelly wrote: post #210
waych wrote: post #188

Earlier quoted context omitted.

You are making the assumption that the first 1000 people somehow had a better way to value the assets being trading than the next group that joins the trade. This is a fallacy as the market sets the prices on its own. No by efficiency I mean the spread and incorporation of more information relating to the underlying asset, making it more closely match their fair value, and the resulting tightening of the spread and r…

Are the new traders introducing more information to the market? Or are they introducing noise?

Even more interestingly, for relatively cheap, you can spread rumors or seed sentiments into the internet via paid shills, so for small amounts of money you can sow false information and cult-like mentalities around certain stocks, and profit off those. If anything, that counts as anti-information, and makes the market less "efficient", except to those who are using the market variance as a means to extract wealth from retail investors.

Re: Robinhood S-1 IPO

#247

Post by pie420 »

mhh__ wrote: post #178
human wrote: post #176

Earlier quoted context omitted.

Robinhood "democratized" gambling on the stock market.

Coming from a country where gambling is like a plague (Most UK high streets are identical, gambling shops are everywhere), is that any worse than gambling elsewhere? Your chances of lucking into some money seem better there than on sports.

Yeah, of course. All other forms of gambling have an inherent negative return (the house has favorable odds always), while the stock market has a positive return inherently as most companies on the stock market are profitable, so it's better than slots or sports gambling for sure

Re: Robinhood S-1 IPO

#248

Post by ivalm »

RobRivera wrote: post #227
ok2938 wrote: post #209

Earlier quoted context omitted.

Funny that you are being played most, when you think you are in control.

yea - everytime I try to explain to peers and family what the price of free is, deaf ears.

It’s better than free, you get a discount relative to NBBO.

Re: Robinhood S-1 IPO

#250

Post by FabHK »

pclmulqdq wrote: post #241
FabHK wrote: post #223

Earlier quoted context omitted.

Though, to be fair, Robinhood offers reasonably spreads. They must execute client orders at a price as good as or better than the national best bid offer, if I understand correctly (Reg NMS [1]). Now, the firms that buy that order flow offer better (tighter) prices, an improvement over the NBBO, and what Robinhood does is take a cut of that improvement. (Robinhood takes a larger cut than other brokers, fair enough, b…

Robinhood's spreads are much larger than many other brokerages because of the deals they make with order flow buyers. Yes, they are still at or better than NBBO, but many brokerages will give you price improvement on crossing orders down to near the midpoint price (unless you are very good at timing the market and already have a great price from crossing). I did an A/B test of this, and found that RH was actually an…

Matt Levine has some insight on this [1]. And you're right, Robinhood's price improvement was bad compared to standard brokers:

> By March 2019, Robinhood had conducted a more extensive internal analysis, which showed that its execution quality and price improvement metrics were substantially worse than other retail broker-dealers in many respects, including the percentage of orders that received price improvement and the amount of price improvement, measured on a per order, per share, and per dollar traded basis.

But again, it's a relative issue. For small trades, overall you got a better deal than paying a slightly better price plus a fixed commission. For large trades, nope. So, at Robinhood the rich big traders subsidised the smaller ones. Kind of fitting for the name.

> For most orders of more than 100 shares, the analysis concluded that Robinhood customers would be better off trading at another broker-dealer because the additional price improvement that such orders would receive at other broker-dealers would likely exceed the approximately $5 per-order commission costs that those broker-dealers were then charging.

All in all, I think their model is defensible, but lying about it isn't.

ETA: To be clear, I think their pricing and revenue model is defensible. But: a 10$ fee for a long term trade is also pretty negligible. What Robinhood have democratised is day trading and gambling, and that's not good.

[1] scroll down to "Robinhood (1)": https://www.bloomberg.com/opinion/articles/2021-01-07/the-ip...

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