Wow, this is very bad if its true! The worst is that most of the millennials wouldn’t understand the implications of HFT trading against them.
Awesome … down with Robin Hood, up with Freetrade!
following on from this
Quoting from the article:
Here’s how it works: Retail brokers like Robinhood focus on recruiting customers and building the trading interface, but don’t actually execute their clients’ orders. They outsource that to firms …
Am I correct that Freetrade actually execute the orders also, no outsourcing?
Quoting from the other Robinhood thread…
Does this mean we can be bigger than $5 billion?
I don’t really know what to make of this as it seems that this is common practice and the regulators allow it. However, it doesn’t make it “right”. Passing trades and trade information to HFT firms feels disingenuous to its retail customers.
Freetrade can do better!
Might seem a silly question but I don’t know so I will ask.
Why can’t a company like Robinhood or Freetrade not just set up in whatever country they choose? It’s an app that can be used from anywhere so what would be the complication in Freetrade doing what they are in the process of doing in the U.K. exactly the same thing in Australia but from their London HQ???
@freetrade_cal will certainly be the best person to give you a definitive answer.
Personally, I think there are a few key difficulties:
- Freetrade must be acquainted with the regulatory aspects of each of the countries it operates in. And be compliant with those, of course.
- Freetrade will need to adapt their universe and account denomination for each country it provides its services in (e.g. you cannot have GBP accounts in Ireland or USD accounts in Australia).
- The latter subsequently requires some tools to hedge the risks Freetrade faces when it comes to currency conversions.
- They will need a localised marketing and customer support teams - costly at the start and not necessarily going to bring profits quickly. And yet, it will damage home market (UK) growth by being an opportunity cost.
- They still need to devote resources to the UK app features’ development and bug removals (even many months after there will be no queue).
Whilst Freetrade’s case is quite understandable (it is still a young company and its means are not endless), Robinhood has a huge cash pile to fight each of the above issues. But as it seems, they deem reinvestment into their home market being more marginally beneficial for growth. They tried to set up a subsidiary in Australia years ago but it would just drain more than provide. After all, while you do not dominate your home market, you will be better off growing there until you become stagnant or unless there is a substantial research that suggests the opposite.
Some more details about Robinhood’s revenue streams & what they haven’t yet disclosed. I wonder if this will prompt another blog post.
That gosh darn paywall!!
Ugh, you could try clicking through from this tweet
Works! Thanks boss.
I don’t have a problem with any of that in the WSJ article. It’s a business and they need to make money. It still works out more beneficial for small investors. However, when you consider it along with all the other things (see links above from Bloomberg and zero hedge)
This is an interesting move into retail banking:
We’ve just been checking this out, that offering is insanely generous, compared to regular US bank’s right now