Odd Lots How They’re Really Making Money On Your Free Robinhood Trades
Jul 30, 2020
Larry Tabb, Head of Market Structure Research at Bloomberg Intelligence, dives into the explosive rise of retail stock trading, especially on platforms like Robinhood. He explains how commission-free trading lures investors while market makers profit from payment for order flow. The discussion highlights the evolving market structure shaped by technology and pandemic-driven trends. Tabb contrasts regulatory environments between the U.S. and Europe, revealing how these differences can affect investor outcomes. Get ready to understand the intricacies behind those 'free' trades!
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Retail Trading Boom
- Retail investors are using commission-free trading to speculate on stocks.
- This is driven by boredom, lack of sports betting, and easy access to platforms like Robinhood.
Commission-Free Trading Model
- Commission-free trading has led to increased retail participation, particularly on platforms like Robinhood.
- This raises questions about how these platforms generate revenue and who profits.
Drivers of Retail Interest
- Multiple factors drive retail trading interest: pandemic fears, economic shutdown boredom, and specific sector bets.
- Zero-commission trading, starting in December, further fueled the retail boom.