Robinhood’s core business more than tripled in Q1
Robinhood Market Inc.’s biggest source of income more than tripled in the first quarter, with the trading app becoming immensely popular with young investors amid the meme stock frenzy.
Revenues from ‘payment for order flow’, a system in which market makers like Citadel Securities pay retail brokers including Robinhood to route orders to them, reached about $ 331 million in the first quarter, up from $ 91 million. million dollars a year ago, according to an analysis of a securities depository.
In the first quarter, revenue from payments for order flow peaked in February at around US $ 121 million, before falling 20% to US $ 96.7 million in March. Much of the decline is due to reduced trading of non-S&P 500 stocks, according to the filing.
Last year, the Menlo Park, Calif., Brokerage took about $ 687 million from those payments, according to regulatory filing data compiled by Bloomberg Intelligence.
Robinhood co-founder and CEO Vlad Tenev said the practice was the company’s biggest source of income. The arrangement is common and leaked in the brokerage industry, but has been controversial because it may cause brokers to push their clients to trade more often.
The app popularized commission-free brokerage and brought millions of Millennials and Gen Zs to the market. Critics, including U.S. lawmakers and a state securities regulator, have said Robinhood makes real money investing too much like a game.
Responding to criticism, Robinhood said its platform does not encourage excessive trading and fulfills a crucial role in financial markets by helping a group of young and diverse traders invest.
At the Berkshire Hathaway annual meeting on Saturday, Warren Buffett weighed in on the Robinhood phenomenon, saying the app has recently become a big part of the “casino side” of the stock market. He also said he was eager to read Robinhood’s S-1 file, which confidentially filed for an initial public offering.