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 case one or more market makers are unable to execute orders. Under applicable exchange fee schedules, we would generally pay the exchange when we take liquidity and are 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 orders.

Example

Jenna wants to buy one share of POWA. To do so, 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 we 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 also sends a small portion of orders to an exchange, taking into account the quality of past executions. This helps maintain trading if one or more market makers are unable to execute orders.

How do we pursue execution quality?

We pursue execution quality by striving for the best price that’s reasonably available for the orders 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.

See execution quality to learn more.

Consistent with SEC Rule 606, we disclose our routing practices and other relevant information required by SEC Rule 606(a) in the "SEC Rule 606 and 607 Disclosure Statements" for RHF and RHS in our Disclosure Library.

Are we incentivized to route orders to one market maker over another?

No. 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 we calculate the rebates we get 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 NBBO.

Do we share your order 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.

Reference No. 2468101
Still have questions? Contact Robinhood Support