How Robinhood Makes $400M a Year on Free Stock Trades

Published on September 2, 2021

Trending vids about penny Stocks Completely, Good Stock Picks, Trading Cheap Stocks, and How Can Stock Trades Be Free, How Robinhood Makes $400M a Year on Free Stock Trades.

How does Robinhood make money? Well, it’s quite complicated, but I will simplify it in this video.

Robinhood is the pioneer of commission-free stock trading, so we need to understand how they earn their money. Robinhood makes most of its money by selling market orders to market makers who are tasked with completing your order for Robinhood. The market makers pay Robinhood a commission for every order to send them. This means that Robinhood gets paid as a result of facilitating trades on the stock market. They are the middle man between the trader and the market maker.

They are raking it in on trade flow. Robinhood, the leader of commission-free trades earns it’s money from … free trades:

“Robinhood, and the rest of the online brokerage industry, rely on what’s known as payment for order flow as their profit engine in lieu of commissions.”

They get paid by market-makers for driving sales of stocks and stock options.

What is a market maker?
A market maker is someone that works for a stock market to provide liquidity to traders. When you buy and sell stocks on the market, you’re interfacing with a market-maker, not another person on the other end. The market-maker ensures to a reasonable degree that we can always buy or sell stocks on the market even if there aren’t enough traders on the other end to complete the transaction at a particular time.

There’s much more to be said about these important players in the market, but we’ll discuss that in the future, so subscribe to know when that comes out.

CNBC Report: https://www.cnbc.com/amp/2020/08/13/how-robinhood-makes-money-on-customer-trades-despite-making-it-free.html


Get started investing with a free stock from Robinhood:
FREE STOCK: http://join.robinhood.com/lincold1

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DISCLAIMER: This and all of my videos are for entertainment purposes only. My statements are my opinions and should not be accepted as financial advice.

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How Can Stock Trades Be Free, How Robinhood Makes $400M a Year on Free Stock Trades.

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