How Robinhood Makes Money
Our mission is to democratize finance for all. Earning revenue allows us to offer you a range of financial products and services at low cost, including commission-free trading. Here’s how we generate the majority of our revenue:
Read on for more detail on how we make money:
When you buy or sell stocks, ETFs, and options through your brokerage account, your orders are sent to one or more market makers or exchanges for execution. To compete with exchanges, market makers offer rebates to brokerages. Market makers typically offer better prices than exchanges.
Robinhood Securities, our clearing broker, developed a routing system to incentivize the market makers Robinhood has relationships with to compete for order flow based on the amount of price improvement obtained. This algorithm, known as the smart order router, prioritizes sending your order to a market maker that’s likely to give you the best execution, based on historical performance. The smart order router also directs a small portion of orders in stocks or ETFs to an exchange, taking into account the quality of past executions. This preserves our ability to maintain trading in the event that one or more market makers is unable to execute orders. Under applicable exchange fee schedules, we would generally pay the exchange when we take liquidity and be paid when we provide liquidity.
Similarly, Robinhood Crypto has relationships with cryptocurrency trading venues that allow you to receive competitive prices. Robinhood Crypto receives volume rebates from those trading venues.
Robinhood Gold, a suite of powerful investing tools, gives you access to Morningstar research reports, NASDAQ Level II Market Data, bigger instant deposits, and margin investing. You pay a $5 monthly fee for the service. When you invest on margin, you’re borrowing funds from Robinhood Securities. If you use more than $1,000 of margin, you’ll pay 2.5% yearly interest on the settled margin amount you use above $1,000.
Robinhood Securities earns income from lending margin securities to counterparties.
Robinhood Securities generates income on uninvested cash that isn't swept to the Cash Management network of program banks, primarily by depositing this cash in interest-bearing bank accounts.
Sutton Bank, which issues the Robinhood debit card pursuant to license by Mastercard® International Incorporated, receives an interchange fee that is passed to Robinhood Financial, our introducing broker. Interchange fees are earned by most debit and credit card issuers and are meant to cover things like transaction processing and fraud loss. The Robinhood debit card is offered in connection with a brokerage account provided through Robinhood Financial LLC, member of SIPC and FINRA.
Robinhood Securities and Robinhood Financial also receive fees from program banks for sweeping funds to them.
We make money from a range of other, smaller revenue streams, including proxy service revenue and fees listed on the Robinhood Financial Fee Schedule.