It’s not just your information that’s the product, it’s your order flow. Professionals are willing to pay extra for the right of first refusal on the other side of Robinhood trades because Robinhood users are (on average) especially active and incompetent traders.

Ameritrade is a really bad broker. excessively high fees..all sorts of shady stuff with option order fill. Tons of online complaints. I have not used Robinhood but I cannot imagine it being worse than TDAmeritrade or any broker being worse than TDAmeritrade. If you trade with sums larger than $50k, use a professional broker such as Interactive Brokers, which institutional clients use.

TDA is a fine broker and the fees are negotiable. I’ve seen active traders get their fees knocked down lower than Schwab or Fidelity, and their Thinkorswim platform is fantastic for trends and analytics...

IB is of course a great broker as well, but TDA is definitely a top tier choice.

Interactive brokers seems quite expensive, doesn't offer trading on swap, and has quite a few other downsides. I doubt that it's used by many serious institutional customers.

I run a hedge fund. There are no hedge fund managers I respect who don’t run their personal accounts on IB. The IB platform is in many ways ahead of the full suites provided by leading prime brokers and third parties. I see many hedge funds -especially smaller ones - going with IB as a prime solution.

Your statement here is just empirically false.

I started my career as a trader at a bank and then moved on to quant/trading/PM roles at extremely cost sensitive firms. Not a single one of them used IBKR.

> There are no hedge fund managers I respect who don’t run their personal accounts on IB.

This thread is about institutional customers rather than personal accounts.

I know at least one former hedge fund manager who ran a high 10 figure hedge fund whose personal account is not at IBKR. I respect him a lot.

> I see many hedge funds -especially smaller ones - going with IB as a prime solution.

Are they cost sensitive? The fact that you have hedge fund structure set up does not mean that you are cost sensitive.

IB is actually one of the cheapest, but are also in almost every global exchange and have a lot of let's say "features". Of all the retail investing platforms, I think they are the biggest and the top pick for rather serious investors. It's actually not very user-friendly.

What makes you think they are expensive? Trading US stocks is like $1 per trade and interest rates are benchmark + 1.5%.

> Of all the retail investing platforms, I think they are the biggest and the top pick for rather serious investors.

I would agree with this, but I'm not sure that this is a meaningful universe for comparison.

It's also quite different from the original claim with which I disagreed.

> use a professional broker such as Interactive Brokers, which institutional clients use

I'm sure that there are some institutional customers who use IBKR, but it's probably not many and they're probably not very cost sensitive.

This is also why I added so many qualifiers to my disagreement. You can open an LLC and be an institutional customer in a certain sense, but it doesn't mean that you're cost sensitive and trying to cut your costs to the bare minimum.

Expensive in what way?

I assume you mean "trading on margin". Swaps are custom contracts and not something average people are doing. IB definitely supports trading on margin and has one of the lowest rates around to do so.

IB is definitely the choice for someone who wants to have real market access and tools at their fingertips.

It's expensive in literally every way from commissions to margin rates.

I meant swaps specifically. I know that they offer margin trading.

That’s just false. Commissions, rates, etc are rock bottom.

However you will be charged at least $10 per month regardless of transactions, unless you have >$100k with them.

Or were you saying specifically their swaps are expensive?

They also have a terrible user interface and horrible support. Highly un-recommended.

It has or at least had really cheap margin rates.

Margin seems pretty expensive too and AFAIK they auto liquidate you rather than letting you meet the call. That's not great in both dimensions.

What the fuck are you talking about dude? They have rock bottom margin rates, like multiple % lower than you get with retail brokers like schwab, etc

Who do you like that's cheaper? IBs margin rates max out around 2% in the US, which seems quite low.

The best tier is about 30bps over fed funds or libor, doesn't matter in the current environment. I've seen better from major banks.

This is on top of the other downsides that I mentioned.

It would be fine if the financing terms were worse, but everything else was better as long as your total costs are lower.

> the spread seems to be inflated (as they probably make money with it)

The Order Protection Rule of Regulation NMS makes this illegal (during regular trading hours).

Execution quality matters and given enough order flow a they can still match client orders to make a profit without giving a worse price than NBBO.

That's easier said than done. If you don't already have proper market making infrastructure and strategies you'll probably lose money trying to do that. Add in market makers paying per order and it doesn't make sense

Yeah am wondering if the OP means that robinhood is playing privileged market maker?

> They might be a good answer for newbies that want to spend 100$ on a stock for the first time, but for anything else I will stay with Ameritrade. Thanks

I don't think you're their target audience. Their marketing materials say things like "democratize markets", "investing for the rest of us" and "learn to invest in the stock market". Also notice that the screenshots of their app feature portfolios with low dollar amounts, compared to the larger dollar amounts the big-boy brokers use as examples in their marketing.

Because they're targeting newbies, and because of their behavior in that context, I think Robinhood wants to be your bookie more than they want to be your broker. The marketing pitch on their landing page reads "Robinhood lets you learn to invest in the stock market for free.", but the updates they've introduced while I've been paying attention to their app seem to be aimed at encouraging people to do risky, stupid things with their money. I assume they plan to monetize this somehow.

What follows are some examples of things I think are pretty scummy, given that Robinhood's target user is an investment newbie:

- They pressure new accounts into paying a monthly fee for what are essentially margin trading accounts, but the vast majority of people should not be trading on margin.

- They promote aggregated news stories from crap outlets like seekingalpha to their users, but curiously not educational material with sound investment advice. Another indication that their pitch about learning, which probably makes newbies feel safer using RH as a platform, is insencere.

- They added the ability to trade cryptocurrencies a short time back. The vast majority of people should not be investing in cryptocurrency. I tend to agree with Nicholas Weaver that most coin funds/offerings are basically scams or thefts waiting to happen. The values of the coins are volatile, and what happens if governments decide to make it difficult to exchange them for desirable currency? At least you can buy drugs on TOR, I guess?

- They recently added option trading. The vast majority of people should not be trading options. It's probably closer to straight up gambling than buying stock at random.

If they really wanted to open up markets to any average Joe with a smartphone and help them learn to invest, rather than encourage them to lose all their money, they wouldn't be prioritizing the things they have.

Just for contrast, you know what simple things Robinhood users can't do? They can't check the managment fees when looking at a fund. They also can't sort their portfolio into short and long term holdings before choosing to sell stock.

Interactive brokers... simple but sophisticated.

I have a hard time believing that the spread is inflated. The SEC would not allow that.

I agree the app could be better, but then again, is it really a wise decision to research companies through your Broker's phone anyway?

And schwab doesn't collect your data ? Of course, it does AND you are paying for trades.