Stock-trading app Robinhood was rejected by 75 investors
businessinsider.com
businessinsider.com
I would really caution connecting your bank account through Plaid on RH. It’s really unclear what data they are collecting but their privacy policy suggests they are collecting your bank account transaction history using Plaid’s API. 100% a dealbreaker for me.
We could debate what "success" means endlessly, but if you're a VC, your job is to put money in companies with low valuations that will eventually end up with high valuations.
What if every company checked that box and couldn't provide lasting value beyond that? Do we still consider this a success because we're posting on a forum run by a VC?
That would mean an overheated late-stage market. (Which recent IPO data haven’t yet made obvious is a thing.)
I'm going to call BS on that one.
How long do you think that would be a sustainable situation? A high mid to late-private stage valuation is only supported by the promise of subsequent valuations.
If every company stopped achieving those subsequent valuations, it would feed back into the private valuations.
It's all rainbows and unicorns, until someone hands you cash and you manage to exit your private, illiquid investment.
It's certainly the first step towards a possible sale.
Remember that 409A valuations are generally drastically below preferred price. I'd be much more inclined to discuss startup valuations in the terms of 409A valuations.
What data are you citing that suggests RH is actually popular given they have released no data about trade volume? This BI story suggests they have a lot of catching up to do to justify their valuation http://www.businessinsider.com/robinhoods-new-web-platforms-...
Something's wrong with your logic.
What do other people think about sharing this type of information?
I looked it up - I'm sure the regulation is massive so not going to read through it entirely, but that looks terrifying. Great time to buy a plot of land somewhere not covered by google maps and start burying gold. I can't really imagine a product that would I would use on top of that and I'm kind of curious who exactly lobbied for that legislation.
I think people would share that information if they could get some benefit from it.
When I open up a checking account, all I need is my license and my SSN and $1000. They don't need the transaction history from every other checking account I have because they are not assuming any liability or risk. Such is the case with the average Robinhood customer, ergo, they should not steal the customer's transaction history from their bank. This should honestly be prosecuted.
I don't mean to be rude, but I think you have to be either high, really dumb, or a robinhood stakeholder to think that people would want this or that it would be a good idea. I would suggest moving to China if you think it's a good idea - I'm sure you will be able to get great discounts on a lot of things if your transaction history is conducive to the greater good in the near future.
"Yesterday we discussed how Robinhood had raised $363 million in new funding at a $5.6 billion post-money valuation. All of that was primary capital, but we've since learned from multiple sources that there also was a secondary transaction whereby Robinhood's co-founders and some early employees cashed out just north of $100 million."
https://www.axios.com/newsletters/axios-pro-rata-9833c302-36...
https://plaid.com/solutions/transaction-data/
> Our high-functioning platform pulls up to 24 months of data directly from users’ bank accounts.
Whoa. I never agreed to anything like that. How is this legal/why would banks let a startup have this much information?
Also as said higher in the comments, if you are not paying you are most probably the product. And I don't want my private investment informations to be sold as data to BigCo. Paying x$ per transaction is a small price to pay to not have your data all over.
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
The Order Protection Rule of Regulation NMS makes this illegal (during regular trading hours).
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.
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.
I meant swaps specifically. I know that they offer margin trading.
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?
What makes you think they are expensive? Trading US stocks is like $1 per trade and interest rates are benchmark + 1.5%.
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.
Your statement here is just empirically false.
> 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 of course a great broker as well, but TDA is definitely a top tier choice.
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?
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.
If you have stock at a brokerage and you want to sell it, FIFO is first in first out. The brokerage will sell the oldest shares you own. It sometimes makes more sense to sell a specific set of shares you bought later depending on purchase price and current price. For example a FIFO sell could generate taxes while a specific lot sell could generate no taxes (you sold at a loss).
I checked what my bank, Postfinance, wants to charge for a brokerage account - it's in multiple hundreds of dollars.
EDIT: Thanks to All for the responses! The offered options seem to be much better than my bank.
- Interactive brokers
- DeGiro
- Lynx
Used 3-4 others, but IB is the simplest and also most featureful one for sure.
I've tried half a dozen brokerages over time, and IB is by far the worst.
I actually found their app pretty simple, but hat might be because i'm an engineer & tend to understand what i am seeing in IBKR app and web site.
Reporting wise, they are the most capable - i needed to apply for a loan, and wanted to hide the list of all securities, i was able to create just that. Pretty flexible, and powerful.
I'm also an engineer, but I know a bad UI when I see one.
Pretty much any other brokerage lets you see a clear historical list of transactions, balances and fees, without having to configure a complex report or jump through any hoops.
When you buy a stock, you're buying at the ask price, when you sell you're selling at the bid price. The difference is what the clearer keeps.
This spread reflects how much the exchange makes.
Assume you are a market maker - you make money off of the bid-ask spread. Specifically, you supply liquidity by issuing standing orders: To buy at the bid, and sell at the ask.
For a market maker, you typically want the price to "stable", and you set your bid/ask to reflect the current order flow supply/demand - this is the "equilibrium" price.
When prices are volatile, your risk is greater. Typically, market makers have to maintain some position in the securities they transact in, and if they don't effectively hedge this position and the price moves against them, they could take big losses.
The optimal condition for a market maker is to have supply and demand balanced, and unchanging. Then you can simply make money off the bid-ask spread without much risk. (All else being equal, having fast access, i.e. HFT, and fast processing systems to detect upcoming likely prices changes also helps)
Market makers are worried about adverse selection; that is, if a huge buy order comes into them, they are worried that the buyer knows more about the price of the security than they do. If they sell to them, the price could subsequently increase, and they could take a loss. (The same applies for a big sell order)
That is why they would prefer not to transact on the open market - i.e. the exchange. It's difficult to tell who are the informed traders.
Instead, they would rather transact against "uninformed" traders. "Uninformed" here does not imply "stupid", but rather just implies that, on average, these traders don't possess any special information or any more information than they do.
In the optimal sense, market makers would prefer to transact against an order flow that is unbiased; one example of this would be an order flow where there are equal numbers of buy and sell orders.
This is why market making firms pay for retail order flow. Retail order flow is assumed to be uninformed, and therefore unbiased relative to the information that the market makers themselves have. Being able to transact against retail order flow thus gives them a relatively unbiased order flow from which they can profit off of the bid-ask spread with much lower risk.
They can fill retail orders with no real concern about adverse selection (unlike on an exchange where an informed institution is trading against you) and make much more of the spread per trade. Hence why they pay for the orders and give price improvement
Source: work at a market maker
The amount of capital I actively trade with makes Robinhood a good fit for me, the amount of contracts/shares I trade in an average position would need to gain 1-2% more to get the same profit if I was paying fees (particularly on options)
https://support.robinhood.com/hc/en-us/articles/202853769-Ho...
> With Robinhood Gold, you get up to 2x your buying power and access to after hours trading for as little as $6 per month. This is the only product Robinhood charges you for, and is completely optional. Trading is still commission free.
> Additionally, Robinhood earns revenue by collecting interest on the cash and securities in Robinhood accounts, much like a bank collects interest on cash deposits.
They are selling Robinhood Gold's extra features, but I bet they make much more on the interest in deposits. If I recall this was their initial path to profitization.
Note that most (almost all?) retail brokerages accept payment for order flow, i.e. getting paid to direct their order flow to certain firms for order execution.
For example, these are the firms that TD Ameritrade receives payment for order flow from: https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD...
From this article, it appears that they do not currently take payments for order flow:
Originally, Robinhood planned to make money off of order flows – a common tactic used by discount brokerages in the 1990s to generate revenue. According to the company's FAQ, Robinhood backpedaled on the idea because it executes orders through a clearing partner and, as a result, receives little to no payment for order flow. The company is willing to return to its original plan in the future if it receives order flows directly or begins to generate a lot of revenue from them.
Definitely surprised by this; I assume that if they did take payment for order flow, that they would be required to disclose this due to some SEC rules, so I'll take it at face value.
https://www.investopedia.com/articles/active-trading/020515/...
Apex Clearing Corporation – Robinhood receives payment from Apex Clearing Corporation for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00008 per dollar of executed trade value for order flow in the first quarter 2018.
Citadel Execution Services – Robinhood receives payment from Citadel Execution Services for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018.
Two Sigma Securities, LLC – Robinhood receives payment from Two Sigma Securities, LLC for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018.
Wolverine Securities, LLC – Robinhood receives payment from Wolverine Securities, LLC for directing equity order flow to this venue. Payment varies based upon a number of factors including but not limited to: the type of security, time of order placement, and the underlying price. Payments received averaged less than $0.00026 per dollar of executed trade value for order flow in the first quarter 2018.
2) Individual investor flow is good flow. Trading companies pay for this flow. Uncertain whether robinhood does this, but (all?) other Joe-Shmo facing brokerages do.
- Payment for order flow - Interest on idle cash - Robinhood Gold, a subscription model with side benefits, the most notable of which is... - Margin lending
It's unclear whether Robinhood is profitable or has a road towards profitability since none of these are really unique in the retail brokerage space, but it certainly seems possible that these combined with a huge customer base and the right amount of frugality could allow for it.
Ford Credit Centre offers business loans to help you grow your business. We give out all kind of loan like Educational loan, Business loan, home loan, Agricultural loan, Personal loan, auto loan and other good Reason, I also give out loans from the rang of $5,000USD- $5,000,000USD at a 3% interest rate. Duration of 1- 15 years depending on the amount you need as loan.
Get back to us for more information
WhatsApp:+1 404 400 4210 www.fordcreditcentre.com
You accumulate a “book” of end customers, usually from a particular demographic, for the purpose of selling to someone who doesn’t have that demographic. Versus flow (e.g. exchanges) or asset accumulation (e.g. ETFs) businesses.
They also have super cheap margin loan rates.
The zero fees might still be nice if you want e.g. to contribute every paycheck; but an old-fashioned Vanguard mutual fund would be just as good for that, or many brokerages have zero fees for specific classes of ETF. The only advantages that I'd see to Robinhood are (a) no minimums, and (b) pretty UX.
But beyond that, Robinhood has a really easy to use UI compared to platforms like TDAmeritrade. It's not only much easier to make trades but also see information like how much dividends I've earned, whether a company has hit their earnings, etc.
Robinhood also lets me invest any money I transfer from my bank immediately. There's no 3-5 business day wait. That said, I'm not sure if this is feature available to everyone or only those on Robinhood Gold.
Semantically I guess it's accurate, but we really should come up with a better way, or different words, to explain what it really means. Distilling it down to "a company's value is X" is extremely misleading IMO.