The Factors Affecting Robinhood As It Makes Money

While Robinhood Is Not Transparent Then How Does It Make Money?

As a discount brokerage service, Robinhood Markets Inc., offers investors commission-free trading through its website and mobile apps and by October 2018, the company was seen to generate nearly half of its revenue from payments for order flow that is ubiquitous although controversial practice whereby a brokerage firm receives compensation and other benefits for directing orders to different parties for trade execution. Therefore it is observed that while the compensation is negligible for small retail trades the company directs billions of dollars in trades to market markers earning substantial amounts. Therefore as Robinhood refers to this source of revenue as rebates from market makers and trading venues, there are other major sources of revenue including a $ 5 monthly fee for optional membership to Robinhood Gold, giving the client access to margin loans and a suite of investing tools and data with interest cash lending stocks purchased on margin as well as fees on purchase using the company’s Cash Management debit card. 

All about Robinhood's Industry

It is observed that Robinhood competes in the nascent whereas fast-growing fintech industry whereby traditional and new players have invested billions of dollars to move investing, banking, and money management as well as other financial services to digital platforms. This is how Robinhood has leveraged technology to become one of the first companies offering commission-free stock trading forcing industry incumbents to lower their fees.

While the fact is that Robinhood has focused on developing proprietary software applications, it is tailored to meet the specific investment and trading needs of its customers in several of the key areas including trading cryptocurrencies like Bitcoin, and Ethereum, US exchange-listed stocks and ETFs, options on US exchange-listed stocks and ETFs with the American Depository Receipts on more than 250 globally listed companies. 

Where Do The Fundraising And Financials Become A Trend?

This is how Robinhood is valued at $ 7.6 billion in a late-stage round of funding as it raised $ 323 million in the Series E funding round with notable investors were DST Global, NEA, Sequoia, Thrive Capital as well as Ribbit Capital. This is where DST Global invested another $ 50million later rounding out the total amount raised in the Series E round to $373 million with the company raising $ 912 million in total funding. So where is the investment trail heading to?

A Note On The History And Leadership

The history of Bitcoin development is a long and adventurous one. While it was the Menlo Park, California based company founded by the company’s current co-CEOs, Stanford University graduates Baiju Bhatt as well as Vladimir Tenev, they were looking for a way to democratize finance making it more accessible to young and less affluent investors. Finally, it was when they offered their first brokerage services to the public in 2015 that by 2016 they had1million users. Currently, there are more than 10 million people having accounts on Robinhood with the median age being around 30 as well as about half of them being first-time investors. 

What are Recent Developments?

It was found that by Denmeber2019, the Financial Industry Regulatory Authority fined Robinhood Financial LLC, which comes as a subsidiary of Robinhood Markets with $ 1.25 million for best executions violations related to customers' equity orders and related supervisory failures occurred between October 2016 and November 2017. Thereby it was certain that the Federal Law required that brokers provide the most advantageous order execution for customers given the prevailing market environment and FINRA specifying that this includes resultant prices to customers that are favorable as possible under those prevailing conditions. 

It was then that early spring of last year that Robinhood acquired MarketSnacks which as a digital media company has also published a daily newsletter aiming at explaining the world of Wall Street in simple terms. Thereby the co-founders of MarketSnacks, Jack Kramer, and Nick Martell have joined Robinhood performing roles as Managing Editors of News. 

The Concluding Words

While markets remain saturated with brokerage firms and Bitcoin investors, there is always one thing to be noted, which is the secret behind Robinhood’s success in emerging as the market capitalists. There are a lot of factors going into the success of Robinhood which comes as a source of envy to competitors. This is why we recommend wise thinking and diligence in making the investment market something that is good to be given the attention.