> For most orders of more than 100 shares, the analysis concluded that Robinhood customers would be better off trading at another broker-dealer because the additional price improvement that such orders would receive at other broker-dealers would likely exceed the approximately $5 per-order commission costs that those broker-dealers were then charging. The analysis further determined that the larger the order, the more significant the price improvement losses for Robinhood customers—for orders over 500 shares, the average Robinhood customer order lost over $15 in price improvement compared to Robinhood’s competitors, with that comparative loss rising to more than $23 per order for orders over 2,000 shares.
Given who RH's target customers are, it seems that the majority of them benefited from no commission and worse execution than if they used a competing broker.
I've never used RH, but I'm happy that they forced all competitors to get rid of their per trade fees.
So in other words, a small subset of customers significantly overpaid so that a large number of customers could get a bargain. The question is whether that's this a good thing, and also whether it's sustainable. Presumably those high-paying customers are going to be top candidates for competing brokerages to steal away with offers of better execution price. If that happens, does RH just content itself with lower profits -- or do they start finding new ways to increase revenue on the backs of their remaining customers?
> For most orders of more than 100 shares, the analysis concluded that Robinhood customers would be better off trading at another broker-dealer because the additional price improvement that such orders would receive at other broker-dealers would likely exceed the approximately $5 per-order commission costs that those broker-dealers were then charging. The analysis further determined that the larger the order, the more significant the price improvement losses for Robinhood customers—for orders over 500 shares, the average Robinhood customer order lost over $15 in price improvement compared to Robinhood’s competitors, with that comparative loss rising to more than $23 per order for orders over 2,000 shares.
Given who RH's target customers are, it seems that the majority of them benefited from no commission and worse execution than if they used a competing broker.
I've never used RH, but I'm happy that they forced all competitors to get rid of their per trade fees.