Robinhood – free exchange? Not if you count “kickbacks” as a “fee”

Several people have asked me about Robinhood, an exchange that touts itself as “fee free”.

So, first thing we want to do is explain that “nothing is free” and Robinhood does have fees. Robinhood makes money/charges you one of three ways:

a) have cash in your account? they keep the interest that cash generates – this probably isn’t much for most people when compared to the amount they would spend trading even once a week on a normal exchange – and as a side note, I don’t know a single crypto exchange that pays interest on cash accounts anyway, so, we can move past this “issue”

b) they pass on the fees from the exchange they’re trading your stock/ETF/crypto on… technically they’re not making a profit here but it’s good to note that the price you’re paying DOES include SOME fees. they’re adjusting the price you pay by adding in the fees from the exchange they’re sending your order to

c) kickbacks from the exchanges they send your order to… oh… yeah, here’s the meat… they’re getting a kickback from the exchange that processes your order

Personally I look at this arrangement as pretty benign. Yes, I hate someone being “technically correct” but they are “technically correct” that a “kickback” is not the same as a “fee”. Remember though, all we care about is your total cost to trade and do business… you’re paying the exchange’s fee, it’s just adjusted in to the price directly so, for example, Litecoin might be $200 plus a $2 trading fee on the exchange directly and $202 through Robinhood… not any difference… then $0.50 might come back to Robinhood… so, it’s not costing you any extra (all prices and percentages are made up for example purposes BTW) – so for me, it’s a big “who cares?”

If you’re paying the same fees as you would through an exchange, then why not just use the exchange they’re using (which they’ve not released a list of those) and go direct? Well, you get a nifty little app to use on your phone (which is primarily why this platform is so popular with younger investors). Most likely your exchange doesn’t have a good app to interface you with your money so, there’s that and, from what I can tell, without much cost.

Lastly, to cover what you care about: how will it affect Bitcoin’s and Ethereum’s price? Well, more money in the market is always good. So, I think, in short, this is a positive move for the cryptocurrency world.


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