How Robinhood Financial & Robinhood Crypto Make 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 Robinhood Financial and Robinhood Crypto generate the majority of their revenue:
*Trades of stocks, ETFs and options are commission-free. Other fees may apply. Please see Robinhood Financial’s Fee Schedule to learn more.
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 variable volume rebates from those trading venues. As of May 13, 2022, for every $100 of notional crypto order volume executed, Robinhood received $0.35 in rebates from its 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 at a discounted rate, if eligible. 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 5% yearly interest on the settled margin amount you use above $1,000.
Robinhood Securities earns income from lending securities to counterparties.
Robinhood Securities generates income on uninvested brokerage cash that isn't swept to the brokerage cash sweep network of program banks, primarily by depositing this cash in interest-bearing bank accounts.
Cash Management is no longer accepting new customers at this time. Existing users from Cash Management can sign up for the waitlist to apply for a migration to the Robinhood Money spending account.
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.
Margin investing involves the risk of greater investment losses. Before using margin, customers must determine whether this type of strategy is right for them given their investment objectives and risk tolerance. For more information please see our Margin Disclosure Statement.
Robinhood Financial charges a standard margin interest rate of 9% and a margin interest rate of 5% for customers who subscribe to Gold. The margin interest rate is calculated by adding 6.5% (for non-Gold customers) or 2.5% (for Gold customers) to the upper bound of the Target Federal Funds Rate, which is set by the Federal Reserve and is subject to change without notice. The formulas used to calculate the margin interest rate are subject to change at Robinhood Financial’s discretion. The margin rates shown are as of 28 July, 2022 and might change at any time without notice and at Robinhood Financial’s discretion. The standard margin interest rate will be rolled out to customers who do not subscribe to Gold in phases over a period of time, subject to eligibility criteria, and so may not be available immediately to all customers.
Robinhood Financial LLC (member SIPC) is a registered broker-dealer. Robinhood Securities, LLC (member SIPC) is a registered broker-dealer and provides brokerage clearing services. Robinhood Crypto, LLC provides cryptocurrency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’). Robinhood Crypto is not a member of SIPC or FINRA. Cryptocurrencies are not stocks, and your cryptocurrency investments are not protected by either FDIC or SIPC; for more information, see the Robinhood Crypto Risk Disclosure.