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Robinhood stock trading app valued at $1.3B with big raise from DST

techcrunch.com

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Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#41

Post by HoyaSaxa »

ryankennedyio wrote: post #18

Does Robinhood sell retail order flow on? I've read conflicting views both ways, but can't really see how they'd make any money if they didn't. I think the way it's being promoted is a bit dangerous though. It seems like they're promoting to the exact market that really, really shouldn't be flipping stocks (and promoting use of margin to do so). Interactive brokers is what, a few bucks a trade anyway? Something aimed…

Yes, they receive payment for routing their order flow to specific market makers. KCG (Knight Capital) and Citadel are the two players that typically get the vast majority of the retail order flow. Two Sigma is starting to get in the business as well. The exact amount Robinhood receives is going to vary considerably, but it primarily depends on if the order takes liquidity(market orders + marketable limit orders) or adds liquidity (normal limit orders).

Retail brokers typically end up making ~$0.001 per share + commission + fees + interest on cash balances + financing spread from margin lending and stock loan

Robinhood makes $0.001 per share + fees + interest on cash balances + financing spread from margin lending

I'm skeptical Robinhood will ever be able to become profitable. They're great for the consumer (except for their heavy marketing of margin lending), but I don't see them attracting the power users they need to make the business model work.

If you do use Robinhood:

1) Build a well diversified portfolio (30+ companies) 2) Don't use leverage 3) Don't trade on a daily/weekly basis

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#42

Post by astrange »

masonhensley wrote: post #8

FYI - you will not have a good time buying and selling stocks onesie-twosie when it comes time to filling out your tax return. If you want to avoid commissions, Schwab & Fidelity have commission free ETF's - just buy and hold.

If you use Turbotax etc. everything just works perfectly.

My only problem doing taxes has been using a robo-advisor called Hedgeable which sometimes decides to buy and sell GLD and bitcoin for you. Turbotax will not help you with non covered securities!

(Hedgeable's pretty good, by the way. By far the more moral out of the two companies I just advertised.)

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#43

Post by astrange »

Boxbot wrote: post #14
kevinmannix wrote: post #3

I laughed at the article's url slug playing on the company's name - now-whos-the-rich . I haven't used Robinhood, but welcome new fintech companies who lower the barrier of entry toward financial health for the average consumer. Good for them, and I hope they use this money well.

I have my doubts that playing with the stock market is in any way conducive to "financial health" for the average consumer.

Traditionally (or when I started looking), a single stock trade was $6 so you'd have to be moving 4 digits at a time to avoid losing everything to fees.

But Robinhood's free. You can do $6 of trades in a year, still learn about stocks and not necessarily lose anything. Very hard to complain about that.

I think a little literacy is needed, since if you're lucky enough to have savings buying CMF+VXF is a much better deal than keeping it in a bank account.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#44

Post by potatote »

I tried opening an account on Robinhood. But they wouldn't approve my application because I am a citizen of Myanmar (Burma) and the country was under economic sanctions. But those sanctions were cleared a bit over a year ago and when I reached out to Robinhood support again (with the proof detailing there is no more sanctions), they ignored my contact. So I decided to stick to Vanguard and TD for index fund buying and stock trading respectively (both of which accept Myanmar citizens as account holders). I think Robinhood's support team is fairly small and they don't have the capability to support a bit more unusual cases like mine.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#45

Post by astrange »

HoyaSaxa wrote: post #41
ryankennedyio wrote: post #18

Does Robinhood sell retail order flow on? I've read conflicting views both ways, but can't really see how they'd make any money if they didn't. I think the way it's being promoted is a bit dangerous though. It seems like they're promoting to the exact market that really, really shouldn't be flipping stocks (and promoting use of margin to do so). Interactive brokers is what, a few bucks a trade anyway? Something aimed…

Yes, they receive payment for routing their order flow to specific market makers. KCG (Knight Capital) and Citadel are the two players that typically get the vast majority of the retail order flow. Two Sigma is starting to get in the business as well. The exact amount Robinhood receives is going to vary considerably, but it primarily depends on if the order takes liquidity(market orders + marketable limit orders) or…

> 1) Build a well diversified portfolio (30+ companies)

This is sensible but Robinhood doesn't have fractional shares (it would cost something if it did), so you're really raising the bar on minimum investments here. If you just bought one Vanguard ETF and did nothing else, that'd be a great plan.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#46

Post by bobbington »

whitepoplar wrote: post #23
nodesocket wrote: post #16

Earlier quoted context omitted.

It's not rocket science, and it is obviously a loan. How is margin shady? This claim that it is somehow predatory or that consumers need to be protected is nonsense. This assumes that people can't do research and due diligence. If you aren't informed to make financial decisions than you probably shouldn't be trading. If you choose to proceed, do so at your own risk. All brokerages offer margin and typically this is h…

Margin isn't shady in the form that it takes at every other brokerage. Robinhood's Gold is shady because they make every attempt to market it as a higher membership tier, to young unsophisticated investors. It may not be illegal, but it certainly seems like a dark pattern.

I think it's more straightforward than margin because u actually see what the margin costs you.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#47

Post by ryankennedyio »

Veratyr wrote: post #28
ryankennedyio wrote: post #18

Does Robinhood sell retail order flow on? I've read conflicting views both ways, but can't really see how they'd make any money if they didn't. I think the way it's being promoted is a bit dangerous though. It seems like they're promoting to the exact market that really, really shouldn't be flipping stocks (and promoting use of margin to do so). Interactive brokers is what, a few bucks a trade anyway? Something aimed…

> Interactive brokers is what, a few bucks a trade anyway? IB Commission is $0.005 per share, with a minimum of $1 total. The problem with IB for regular folks is a bunch of monthly fees if you don't have enough activity each month. https://www.interactivebrokers.com/en/index.php?f=1590&p=sto...

True, I forgot about the extra monthly fees -- though you can just use free, 20 minute delayed data. I also forgot that the US is so cheap -- I pay $6 each way with IB on the ASX.

Re: Robinhood stock trading app valued at $1.3B with big raise from DST

#48

Post by toomuchtodo »

astrange wrote: post #45
HoyaSaxa wrote: post #41

Earlier quoted context omitted.

Yes, they receive payment for routing their order flow to specific market makers. KCG (Knight Capital) and Citadel are the two players that typically get the vast majority of the retail order flow. Two Sigma is starting to get in the business as well. The exact amount Robinhood receives is going to vary considerably, but it primarily depends on if the order takes liquidity(market orders + marketable limit orders) or…

> 1) Build a well diversified portfolio (30+ companies) This is sensible but Robinhood doesn't have fractional shares (it would cost something if it did), so you're really raising the bar on minimum investments here. If you just bought one Vanguard ETF and did nothing else, that'd be a great plan.

Yeah, but that'd show Robinhood's user base there is no need for the product.
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