Stock Order Routing
When you buy or sell stocks on Robinhood, we send your orders to market makers that typically offer better prices than public exchanges.
To compete with exchanges, the market makers with which we have relationships offer rebates to brokerages like ours. Rebates are one of several revenue streams that make it possible for us to provide a range of financial products and services at low cost.
What is order routing?
Order routing is the process of sending your order to a market maker.
What is a market maker?
A market maker is a third-party institution that actually executes your order.
Jenna wants to buy a share of MEOW. To do that, she places a buy order on Robinhood. From there, in just a matter of milliseconds, Robinhood's order routing system uses an algorithm to determine which market maker is most likely to provide the best price for her order.
How do you decide where to route orders?
We have relationships with a number of market makers in an effort to optimize speed and execution quality. Of these market makers, our system automatically routes orders to the market maker that’s most likely to give you the best execution, based on historical performance.
How do you pursue a quality execution?
A quality execution means getting you the best price reasonably available on any order you place.
Our systems are built to automatically send your order to the market maker most likely to give you the best price, based on historical performance. In addition, the majority of our orders are filled at the National Best Bid and Offer (NBBO) or better, which means most customers are, at a minimum, receiving the best available bid or ask price. We also perform regular, rigorous reviews of the execution quality our customers receive, looking at factors like execution price, speed, and price improvement.
You can read more detail about our execution quality here.
Are you incentivized to route orders to one market maker over another?
No. To operate a fair system, we don’t take rebates into consideration when we choose the market maker that executes your order. Also, all market makers with whom we have relationships pay us rebates at the same rate, which means we aren’t incentivized to send orders to any one specific market maker.
How do you structure the rebates you receive from market makers?
We earn a percentage of the bid-ask spread, or the difference between the highest price to buy (bid) and the lowest price to sell (ask) the equity, at the time of execution. Spread is determined by the National Best Bid and Offer (NBBO) published spread.
Do you share my order information with anyone other than the market maker?
No, we do not share your order information with anyone before we send orders to market makers.