40% of Robinhood revenue is selling your data

[Ipv6Ready]

https://www.bloomberg.com/news/arti...controversial-bargain-with-high-speed-traders

40 percent of its revenue earlier this year from selling its customers’ orders to high-frequency trading firms, or market makers, like Citadel Securities and Two Sigma Securities

During that quarter in 2017, Citadel and Two Sigma paid the company more per share of order flow than they paid TD Ameritrade Holding Corp., E*Trade Financial Corp. and Charles Schwab Corp., filings show. Robinhood was also allocating more of its orders to Citadel than it was to Two Sigma, which offered rebates that were a third smaller per share, and to Wolverine, which paid it even less per share.

Interesting people were using them to stick a finger up at traditional institutions, while robinhood was giving the finger to its users.

 

[aleks]

The only broker who doesn't sell the flow and doesn't charge is Vanguard and it looks like they only offer this product to US citizens. Unfortunately, if you don't have over $25k USD to open an account with Schwab, Robinhood looks like the next best option.

If only someone could give the retail product managers at Vanguard Australia a slap across the face so they would wake up. There would be a flood of people in Australia who would sign up to a superannuation or brokerage service if they offered it.

 

[goldpelican]

Selling orders, not selling data. Big difference.

Places like Citadal are effectively buying volume - my understanding is that they need the volume for their own high frequency trading strategies to work effectively. At individual retail investor volumes, the difference in price that might arise because your order feeds a bot is still likely to be far less than what you've saved on trading fees. Citadel are making their money on what they can scrape from feeding 100,000 or 1m or however many trades a day they can pull from Robinhood - and it's worth it to them to buy this volume. Robinhood are brilliant in having turned a cost of business line item into a revenue line item.

Often the best business models are the ones that aren't outwardly apparent - Robinhood is a lender and order broker, not a stock broker. Kind of like how McDonalds is a real estate company and food wholesaler.

 

[Ipv6Ready]

Selling orders, not selling data. Big difference.

Places like Citadal are effectively buying volume - my understanding is that they need the volume for their own high frequency trading strategies to work effectively. At individual retail investor volumes, the difference in price that might arise because your order feeds a bot is still likely to be far less than what you've saved on trading fees. Citadel are making their money on what they can scrape from feeding 100,000 or 1m or however many trades a day they can pull from Robinhood - and it's worth it to them to buy this volume. Robinhood are brilliant in having turned a cost of business line item into a revenue line item.

Often the best business models are the ones that aren't outwardly apparent - Robinhood is a lender and order broker, not a stock broker. Kind of like how McDonalds is a real estate company and food wholesaler.

But something is fishy, as Robinhood gets paid more per trade flow from Citadel etc that etrade.
Alpha reports many multiples more, so need to do more digging.

 

[aleks]

So far every new trading platform/app targetted at younger folk currently available in Australia is rubbish; Acorns, Stake, Raiz etc have a list of fees that are too high, aren't initially apparent or difficult to understand.

 

[Ipv6Ready]

So far every new trading platform/app targetted at younger folk currently available in Australia is rubbish; Acorns, Stake, Raiz etc have a list of fees that are too high, aren't initially apparent or difficult to understand.

They are probably not selling enough information, if they loosened their EULA to allow them to sell the name, age, DOB, email, phone and address of the user, they could do it for free.

Most millennial dont care anyway, look at the average Facebook account for 18 to 22 years old, all that information is public anyway.