Robinhood Introduces Zero Comissions for Crypto Trades!

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I think this should have been the headline of the day with Robinhood today 6/3/2021 announcing zero commission fees for trading cryptos on its platform. Although Robinhood does not have a ton of cryptos to trade the fact that it is zero fees is huge! How huge?

Zero Commissions Fees

Robinhood when first launched it had many features to entice younger generations to invest in the stock market. The so call gamification features the app made for stock trading allow many younger traders to get hooked into investing. Another big incentive for using Robinhood is that traders pay zero commission fees on stock trades. Furthermore option trades per contract were also zero commissions. Robinhood started official launch in 2015 and today has estimate of over 20 million customers.

The way Robinhood is able to get zero commissions fee lies in the relationships they have with the clearing house firms and they earn their fees through payment by order flow. In laymen terms when retail investors put on an order on Robinhood, Robinhood takes the order and transfer it to companies that had prior negotiated with Robinhood on a set fee to get the retail orders from Robinhood. That way the companies can take the other side of the retail trade or transfer it to specific banks that would accept the other side of the trade. The fees Robinhood earns would maintain zero commissions for its customers.

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As Robinhood rose in popularity well established brokerages and banks such as Charles Schwab, Fidelity, Think or Swim, TD Ameritrade, ETrade and many others began to follow suite with zero commissions on trades. The end result it force an entire market to trading market to have its trading fees cut down to negligible or even zero to compete with each other.

The lower commissions costs and ease of trading allowed many more participants into the markets over the years since. Charles Schwab one of the longest established brokerages went to free commissions in late 2019. Within the year many of the other brokerages followed suite. However this all is likely started with Robinhood as it was the first ever to offer commissions free trading.

Conclusions

This is a paradigm shift with zero commissions fees in crypto trading as it happened to stock trading. Stock trading existed for over 100s but it took until 2015 when Robinhoods came out to have commissions fees be zero. Now the stock market is trading the more options on a daily basis than stock shares. The crypto trading market will follow with demand as fees are now zero commission fees at Robinhood.

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Marketwatch News Source Article

Chart above is a clear indication of what users will benefit for using Robinhood compares to other crypto exchanges as of today. The fees for crypto trading are zero. What will be difficult to realize though is the payment order flow may not get prices filled at ideal prices for retail. However that can still be subjective and timing matters. For now the whole theme of zero commissions in the crypto space is another incentive moving forward for retail traders who are willing to invest in crypto.

None of this is cryptocurrency investment advice. This is for entertainment purposes only. Thanks for reading.



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24 comments
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!LUV

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Stack more then 1000 BBH Tokens at you account to use this feature.

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Zero commission always comes with a cost. If we consider the normal stock market, they tend to sell the order flow and its tough for the companies to pay for it when most of it is public.

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Order flow in the trading industry is the retail traders orders being directed to firms that pay Robinhood a fix sum to receive. Example I go on Robinhood and buy 10 shares of AAPL stock at $130 each. Robinhood sends my order to a firm such as Citadel and they execute the trade for me. Citadel is the actual firm that did the trade. Robinhood was the exchange that sends the retail trades to Citadel. Robinhood gets paid by Citadel before hand on all trades before they happen at a negotiated fee.

You maybe wondering why even have Robinhood then? Citadel does not want to have direct interface with retail because they want to focus all their resources to make the fastest and best price fill in trades. This takes a lot of computer power and other resources to accomplish. However it also allows Citadel to hide themselves from the public as Robinhood is the only entity retail can talk to if the trades on the platform. Crazy deception huh? !LUV and !PIZZA

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the payment order flow may not get prices filled at ideal prices for retail.

I thought that would be the catch. It would be good to have a comparison table of actual prices of those exchanges above. Even with zero fees it might work out cheaper to use the others.

Also, how much does it cost to remove tokens from the exchange?

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I will try to look for data and see what comes out of it but from my understanding retail will always suffer whether it’s paying a commission fee or payment order flow. Reason being is that as retail puts on their trade the opposite end is usually done by banks and they have all the retail orders to compare. That is why majority of retail traders losses. Their hands are always open to the dealers so dealers know how to react to beat retail. On top of that paying a commission fee just meant more more pay to banks then to be able to invest. Commission free cuts out some

Good question! I haven’t looked at latest data but from trading experience I can tell you I don’t use Robinhood to trade. The price order it fills is very very important when it comes to trading. If order flow forces the trade not being able to execute due to buying price being too low or selling price being to high I can not participate in the market. Timing is important but so is the price I enter and exit. Relying on order flow will not always get me to the right price I want to buy or sell. I rather want to have a better price filled than free commissions any day.

There is an old saying in trading community. It is better to wish I was in the market than to wish I could get out of the market. I just do not want to get stuck if I needed to sell and not sell to low for a major loss.

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Thanks for the extra information.

From what you've said I don't think I'm going to be using Robinhood anytime soon. 😊

It is better to wish I was in the market than to wish I could get out of the market

I've not heard that one before but the spirit of it is always in the back of my mind when I start to HODL some of the Hive based tokens. 😁

!ENGAGE 30

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Thank you for your engagement on this post, you have recieved ENGAGE tokens.

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Oh and we can’t directly withdrawal crypto from Robinhood. It has to be exchanged into fiat to be withdrawn.

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Anything to get those fees reduced.

Of course, Robinhood is also bad at limiting trades due to that "no fee".

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Nothing is free. There is always a catch. What would be beneficial is that other crypto exchanges will lower their fees to compete. That is what I am hoping. !LUV and !PIZZA

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Exactly.
Pressure to lower those fees.

The trading fees for regular stocks used to be very high.

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After what Robinhood did with $GME, I'm staying away. They aren't trying to do you any favors.

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They are no different that a bank though, while holding your money, they use it to make them money, not to mention, not your wallet, not your coins or stocks. They provide you with no keys and they will freeze you whenever they want like they did recently.

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