Robin Hood has raised at least $ 110 million from the “Memestock” rally

Stock trading app Robin Hood has captured at least $ 110 million from so-called Memestock rally This caused the stock prices of retailer GameStop and other struggling companies to skyrocket earlier this year.

According to the company, commissions earned by digital trading platforms selling user stock orders to other Wall Street companies increased to $ 331 million in the first three months of this year. analysis Posted online by market research firm Alphacution earlier this week. This is an increase from $ 221 million in the last three months of 2020. This increase is more than Robin Hood earned $ 91 million from the same price a year ago.

How Robin Hood Collects Underscores for Significant Increases in Fees Collected Popular trading app Became. The company does not disclose the total number of accounts, but is believed to have added millions of new users over the past year. It also shows how much money Robin Hood can make with market frenzy, even if the app allows customers to trade stocks and options almost free of charge.

“Based on these numbers, the meme stock market frenzy seems to have been a net plus for Robin Hood,” said Paul Roydi, who runs Alpha Cution. “This is a retail broker that thrives on account growth and activity on those accounts.”

Why Robin Hood is different

Robin Hood charges itself Equivalent to an online securities company. And unlike most other brokerage firms, it doesn’t charge transaction fees, so it’s becoming more popular. However, although Robin Hood is technically a brokerage firm, the client’s buy and sell orders have not been completed.

Instead, Robin Hood sends these orders to other companies such as hedge funds and trading firm Citadel Securities and Virtu Financial, one of Wall Street’s largest high-frequency trading firms. These companies make money by matching buyers and sellers of stocks and other financial instruments and pay a commission to send a customer transaction to Robin Hood.

The company is estimated to make 80% of its revenue from these controversial fees, known as “payment of order flows.” Other online brokerage firms charge similar fees, but few seem to sell as well as Robin Hood.

Critics say the deal will allow brokers like Robin Hood to send customer orders to the trading companies that pay the highest fees, rather than completing their stock orders at the best prices.

Robin Hood refused to comment on the story. In a blog post in March, the company Said By routing transactions to other companies, the transaction costs of customers are reduced.

Robin Hood in April said he had submitted the first regulatory documents Will be released later this year.. For now, you don’t need to disclose total sales or revenue.

SEC to look at

Regulators are scrutinizing payments for order flow arrangements. Thursday’s House Financial Services Commission Third hearing Why GameStop and other companies’ shares soared in January and fell just as quickly.

“I think you should consider paying for your order flow, especially when you’re talking between a broker and a market maker that you can make a profit, or your client can make a profit. “Gary Gensler, chairman of the new Securities and Exchange Commission, said.

According to Gensler, the agency will publish a report on the January surge in GameStop and other meme stocks.

House Committee will hold a hearing at GameStop


December, SEC Accusation against Robin Hood Because it does not properly disclose how it makes money and does not always give clients the best execution price for their stock trading. Robin Hood paid $ 65 million to settle the indictment, but did not officially admit that it had done anything wrong.

Still, Alphacution’s Rowady described the scrutiny faced by Robin Hood after the meme stock enthusiasts did not seem to have adversely affected their financial performance earlier this year.

“I think some people are looking away from Robin Hood, but the impact isn’t apparent in these numbers,” he said. “These numbers show significant growth.” Robin Hood has raised at least $ 110 million from the “Memestock” rally

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