Robinhood Market Inc.’s biggest source of income – payment for order flow – more than tripled in the first quarter, with the trading app becoming extremely popular with young investors amid the meme stock frenzy.
Revenues from “payment for order flow,” a system in which market makers like Citadel Securities pay retail brokers, including Robinhood, for their order routing, reached approximately $ 331 million at first. quarter, up from $ 91 million a year ago, according to a securities filing. cited last week by the Wall Street Journal.
Reddit CrowdMania delivers a dangerous rush
Last year, the Menlo Park, Calif.-Based brokerage withdrew about $ 687 million from those payments, according to regulatory filing data compiled by Bloomberg Intelligence.
Robinhood co-founder and CEO Vlad Tenev said the practice was the company’s biggest source of income. The arrangement is common and leaked in the brokerage industry, but has been controversial because it may cause brokers to push their clients to trade more often.
Robinhood made trading easy, and maybe even too hard to resist
The app popularized commission-free brokerage and introduced millions of millennials and Gen Zs in the market. Critics, including US lawmakers and a public securities regulator, said Robinhood allows real money to be invested Feel too much like a game.
Responding to criticism, Robinhood said its platform does not encourage excessive trading and fulfills a crucial role in financial markets by helping a young and diverse group of traders invest.
AT Berkshire Hathaway’s annual meeting on Saturday, Warren Buffett weighed in on the Robinhood phenomenon, saying the app has recently become a big part of the “casino aspect” of the stock market. He also said he looked forward to reading Robinhood’s S-1 filing, which confidentially filed an initial public offering.