Mobile Technology

Zero-commission stock trading app Robinhood aims to shake up the market

Zero-commission stock trading ...
The portfolio screen of Robinhood's zero-commission trading app indicates markets are open
The portfolio screen of Robinhood's zero-commission trading app indicates markets are open
View 7 Images
The buying screen of Robinhood's zero-commission trading app
1/7
The buying screen of Robinhood's zero-commission trading app
Robinhood's zero-commission trading app
2/7
Robinhood's zero-commission trading app
Robinhood's fee schedule
3/7
Robinhood's fee schedule
The portfolio screen of Robinhood's zero-commission trading app
4/7
The portfolio screen of Robinhood's zero-commission trading app
The single share screen of Robinhood's zero-commission trading app
5/7
The single share screen of Robinhood's zero-commission trading app
The portfolio screen of Robinhood's zero-commission trading app
6/7
The portfolio screen of Robinhood's zero-commission trading app
The portfolio screen of Robinhood's zero-commission trading app indicates markets are open
7/7
The portfolio screen of Robinhood's zero-commission trading app indicates markets are open

Stock trading has never looked particularly inviting to young, first time investors. Minimum balances and US$8 per trade fees make it hard to dip your toe in the water. Startup brokerage Robinhood, which has just raised some $13 million in venture capital, is aiming to change the game and invite a new generation of mobile investors onto the trading floor with a beautiful, simple trading app for iPhone, and zero-commission, zero minimum balance stock trading.

One of the many advantages large institutions hold over small, private investors is that where the individual has to fork out between $5 and $10 per trade, the institutions are getting charged fractions of a cent.

The cost of entry can also be too high for many folks to consider dipping a toe in the water with many of the cheaper per-trade options requiring you to hold a minimum balance in the thousands of dollars before they'll let you participate.

Most trading companies have no interest in attracting youngsters and first-timers into the fold. They want to deal with experienced investors with decent sized portfolios. Robinhood is the opposite, a tech-focused company that's specifically targeting young people with zero-commission trades and no minimum balance for participation.

Robinhood's business, started up by a couple of Stanford grads, is centered around its mobile app. It's a pretty, user friendly iPhone app (Android app is on the cards sometime in the future) that makes trading look stylish, fun, easy and social for investors. Users can link in a bank account and trade directly using those funds.

It's certainly easy on the eye, with the app displaying in black when the markets are closed, white when they're open. Stocks pop up in red if they're losing money or green if you're winning, and trades can be executed in just a few steps. Market data is viewed in real time and the app gives users notifications on upcoming scheduled events, such as earnings, dividends and splits.

The buying screen of Robinhood's zero-commission trading app
The buying screen of Robinhood's zero-commission trading app

Having recently raised some $13 million in venture capital, Robinhood is currently in beta testing, with 80 percent of its user base under the age of 30. There are nearly half a million users waiting to join once security and reliability testing is completed to the company's satisfaction.

How does Robinhood make a dime without charging fees for small trades? The company plans to charge for "premium services for active investors," as well as offering API access to its platform to other companies. It will also "receive remuneration for providing trade volume in certain markets."

Zero-commission trading with no bricks-and-mortar storefront or Wall Street presence, targeted at young investors and providing a clean, simple and fun mobile experience – this could be a very disruptive technology in the finance world, and could encourage a lot more people to get into the stock market.

It will be interesting to see how companies like E*Trade, Schwab and Scottrade respond to the Robinhood value proposition with this kind of competition having the potential to make the lower echelons of the investing world a lot more democratic.

Source: Robinhood

7 comments
zevulon
the stock market brokers make money on order flow, rebates, and essentially charging you a premium for your 'execution price' in addition to 'fees'. so this app advertises no fees, which means you are guaranteed to be getting screwed worse than normal on execution. your broker is legally, or at least the sec permits it , allowed to take rebates from the electronic exchange that is allowed to front run your order and give you a higher price. so you're not actually trading against your broker, but you are. and if your broker says they won't charge you for their efforts, then they are screwing you badly on the execution. this is how corrupt and stupid things have gotten with the casino that used to be a stock market.
Mirmillion
Great now retail investors can get screwed by the high frequency trading platforms of major banks and brokerages for free. At least the pretense of provision of value will have been removed from the "privilege of trading" sales pitch. One more step toward a level playing field....
Mel Tisdale
This is just further confirmation that there is one big reset coming down the pike. This is just a hedge on their part to protect them when the stock bubble bursts. What a mess we are in and they have such dominance that they can get away with it. Come back Occupy, all is forgiven.
McDesign
Uh - any of you guys actually trade actively?
pmshah
@zevulon Believe me there will be those who will test their transactions via both avenues and determine who is screwing who. If your assertion proves correct Robinhood will go down the drain, otherwise "lookout big brokers" !
Joseph Boe
"It will be interesting to see how companies like E*Trade, Schwab and Scottrade respond to the Robinhood value proposition..." If it succeeds they will respond by squashing it like a bug.
Sison Siy
There used to be a similar trading platform that offered free trades called Zecco, I started trading there and was hooked ever since. Unfortunately that business model was unsustainable and they had to charge fees later.