Which is to say, they aren't the first $0 brokerage and they won't be the last $0 brokerage. But I don't expect them to be around long term and I double don't expect them to provide $0 trades long term.
I was excited to try Robinhood until I realized that bad execution on the app side (my side) and on getting order fills (their side) would eat up all if nor more of the benefits. Plus frankly if they were poor at getting you to trade to generate exchange rebates, I have to wonder what else they were doing/planning with your money.
Perhaps its because they don't want "real traders" or "buy and hold" people as their inventory. Given that the users of Robinhood are what they are selling, maybe they can get more for those users if they prove that they are both unsophisticated and active? I know thats the kind of counterparty I'd want if I was paying for order flow.
In other words - Robinhood's competitors make you pay a fee for access to better prices. That seems like a reasonable value proposition to me.
You need to be careful about what you mean when you say this. Robinhood should not be offering spreads worse than the NBBO and if they are you should document it.
The vast majority of Robinhoods order flow and execution is paid for by Citadel and Knight, who also pay for the order flow of the vast majority of other retail trading outfits. I'd be very surprised if the spreads were significantly different (though maybe execution times are worse on Robinhood leading to worse fill rates).
Robinhood is a fascinating scheme of some sorts in my opinion. They will have to raise money from new VC investors to make commission payments. They need to be raising more money. This app will continue as long as they raise money and the VC money feed continues. For the sake of its employees, I hope the feed continues.
"so I am "out". ( Shark Tank :))