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Will Robinhood survive offering commission free stock trading?

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asked Jan 14, 2016 in Finance by JLettermanMB (43,320 points)
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1 Answer

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The idea is fantastic. Robinhood works as a platform built on a 'commission free' setup. This means all trades are made without spending a penny.

 

Sounds like a great deal on paper, but how do they make money then?

 

The power of their platform will be through the use of dormant funds. These are funds that are sitting in the trader's account untouched. The idea is these funds can continually be invested by Robinhood to help the company earn money. The more they grow, the more their dormant funds pile grows as well. It is a unique method of earning money and it is going to work in their eyes [1].

 

Another way they will be looking to make money is by licensing software to firms in the financial world. They have a considerable amount of experience in creating software and this is going to help fund Robinhood in general [2].

 

References

 

1) http://qz.com/330015/robinhoods-free-stock-trading-app-and-its-long-odds-of-survival/

 

2) http://www.cnbc.com/2015/08/18/free-investing-app-robinhood-not-looking-to-charge.html

answered Jan 17, 2016 by kingusama92 (23,380 points)

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