Stock, ETF, and options order routing
When you buy or sell stocks, ETFs, and options on Robinhood, we mostly 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 a low cost.
We also route a small portion of orders in stocks and ETFs to an exchange, taking into account the quality of past executions. This preserves the 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.
What is order routing?
Order routing is the process of sending your order to a market maker or directly to an exchange.
What is a market maker?
A market maker is a third-party institution that typically acts as a liquidity provider and executes your order.
Jenna wants to buy one share of POWA. To do that, she places a buy order on Robinhood. From there, Robinhood's order routing system uses an algorithm that sends her order to a market maker or exchange based in part on the quality of its past executions.
How do you decide where to route orders?
We have relationships with several market makers, and our routing system is designed to automatically send most orders to the market makers that are likely to give you the best execution, based on historical performance. The routing system is also designed to automatically send a small portion of orders in stocks and ETFs to an exchange, taking into account the quality of past executions, thereby preserving the ability to maintain trading in the event that one or more market makers is unable to execute orders.
How do you pursue a quality execution?
A quality execution means getting you the best price reasonably available on any order you place.
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 publicly 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 details about our execution quality on our website.
Are you incentivized to route orders to one market maker over another?
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 calculate 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. The spread is determined by the National Best Bid and Offer (NBBO).
Do you share my order information with anyone other than the market maker or exchange?
No, we do not share your order information with anyone before we send orders to market makers or exchanges.