This is news to me. As far as I can tell, everything about their app is designed for you to treat the stock market like a game. From the notification defaults down to the content layout. They also sign users up for a daily stock market newsletter that encourages "trading the news" and their unofficial user forum is essentially Wall Street Bets, which they have never tried to distance themselves from.
Making it easier to trade stocks through better UI design isn't inherently a bad thing, I agree. However, looking at the insanely disproportionate amount of their revenue that comes from "day" traders and speculative option junkies, they're extremely incentivized to keep milking this customer group over their more sane buy-and-hold users.
And we all know the data, a vast majority of these users will lose money on a risk adjusted basis compared to just buying the whole market in a passive ETF.
But there's no money to be made in passive ETFs, so Robinhood will likely never roll out automated passive ETF investing a la Wealthfront.
Robinhood has a responsibility to its investors to maximize profits, therefore its hilarious to think they won't do anything to keep encouraging their most profitable user segment to keep trading.
The large brokers more or less did not care when robinhood did the same thing years and years and years ago.
- https://fortune.com/2020/07/08/robinhood-makes-millions-sell...
The concern is that when market makers share that profit with brokerages they encourage brokerages to select the market maker that gives them the biggest cut rather than the one who gives the best price for the trader. Still, the trader will never get a worse price than what's available on the exchange. (That's also illegal.)
It’s similar to a casino offering free hotel rooms to people who play blackjack but who do not know how to card count. They even offer 3/2 on blackjack instead of 6/5.
That's literally not payment for order flow works, and it's illegal under regulation NMS.
For smaller trades that's charging 99+% less than their competitors at the time..
So even if "it's not really free" it's still a significant discount compared to the pricing that was standard before RH came along. Opening up investing to more people by making smaller & more frequent trades feasible seems generally good to me.
I will admit that other aspects of Robinhood's business such as the degree of gamification are still concerning, though.
Any investor can get 0 now with good brokerages or use something like IB for cheap trades on otc or foreign stocks in small amounts.
I'm not a robinhood fan - I moved all the investments I had out of their years ago. But, to think they are the only one selling order flow is disingenuous
As far as I remember, it's just based on the gains / losses you had during the day. So depositing cash at the end of the day shouldn't affect your gain/loss.
I guess that’s exactly what to expect when you apply that SV-type growth hacker PMs to a trading platform.
Granted, this wasn't really a big change in accessibility if you wanted to trade stocks. One could simply goto Fidelity ore other brokers and do the same thing. However, Robinhood's app is much more approachable for someone new to finance.
Reducing the barrier to entry isn't a bad thing and will always lead to some percentage of new comers doing dumb things. That doesn't mean Robinhood is encouraging it intentionally. I think its merely a side effect of their apps approachability for someone less familiar with financial instruments.