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Crypto trading: How does Robinhood get benefits with zero fees?

Robinhood promotes zero-rate negotiation for its services, but how do they make profits? The answer lies in the fact that their “real customers” are high frequency commercial companies, not the customers who use their commercial services. The well-known investment company, Robinhood, is actively promoting its zero-rate negotiation services for potential clients. Using the marketing slogan “Invest for Free, the company that just expanded its business in cryptography earlier this year also mentions on the home page of the website” Robinhood allows you to learn to invest in the stock market for free. ”

Many may be wondering how the company makes a profit if they do not charge customers who use their services. The answer lies in the company’s business model.

It turns out that Robinhood does not perform all of its clients’ operations on its own platform, but sells the trading orders to 5 high frequency commercial companies; They are Apex Clearing Corporation, Citadel Securities, Two Sigma Securities, Wolverine Securities and Virtu Financial. From there, they will choose which trading platform to use to execute the transactions on behalf of their clients.

These companies pay Robinhood between USD 0.00008 and USD 0.00026 for every USD sold in a commercial transaction. While it may seem insignificant, Robinhood actually generates a decent amount of income from such a system. In fact, compared to companies such as E * Trade which earns USD 47 million and TD Ameritrade which earns USD 119 million per quarter, it is said that Robinhood generates 10 times more in profits.

Seeing this, it can be said that the “clients” of Robinhood are actually high frequency commercial companies, and their products are actually the clients that use their investment services.

According to Bitcoinnews, high-frequency commercial companies make large profits from Robinhood’s customers, while customers do not pay attention to the non-optimized offers they get from Robinhood because of “Free Investment.” Marketing slogan that is strongly promoted by the company.

However, customers can explore and benefit from Robinhood’s broad investment portfolio, as the company strives to provide support for more cryptocurrencies on its platform.


Also published on Medium.

Published inCryptocurrencies

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