Robinhood Brokerage

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ether
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Joined: Sat Nov 17, 2012 1:50 am
Location: Charlotte, USA
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Robinhood Brokerage

Post by ether » Sun Aug 05, 2018 12:38 pm

Just me review of the Robinhood brokerage:

Pro:
-No fees on equity trades
-No fee on option trades
-Nice web and mobile UI
-Crypto access
-Will lend you $1000 per transfer on interest free margin
-Free multi leg option trades

Con:
-Market orders are garbage
-No DRIP
-Crypto prices are much higher than coinbase
-Won't let you place limits on multi leg options trades
-Hard to tell what is long/short term gains
-They want 5.5% interest for margin

What has everyone else's experience been like?

jacob
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Re: Robinhood Brokerage

Post by jacob » Sun Aug 05, 2018 2:43 pm

TANSTAAFL!

So what might be going on under the hood is the fact that if you (as the broker) selective channel your trades to a exchanges according to whether they pay you for some trades (most famously BATS (they operate several)) and charge for others.

For example, if you buy or sell 100sh on BATS passively (a limit order) you might RECEIVE $1 (for providing liquidity). Whereas if you go actively (a market order), you might pay $7. This is also how funds can offer 0% fees---the idea is to fund it with rebates and hope that the tracking error doesn't get too big.

What's a possible broker business model here? All passive orders get sent to the exchange that has the highest rebate. All the active ones get sent to the exchange that has the lowest fee. This might be an obvious point but it's crucial to understanding shitty execution. No trade takes places unless an active buyer/seller meets a passive seller/buyer on the same exchange. What most retailers seem to be unaware of is that there are (2015 numbers) about 40 different exchanges/dark pools in the US alone.

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