Robinhood Markets, Inc.

Robinhood Markets Inc. (stock code: HOOD) is an American fintech company that primarily provides online trading services for individual investors through its mobile application, including stocks, exchange-traded funds (ETFs), options, gold, and cryptocurrencies. Its core business model is "zero-commission" trading, aimed at lowering the investment threshold and achieving "financial democratization," attracting a large number of retail investors.

Although Robinhood claims to offer "zero-commission" trading, its profit model is diversified, mainly including the following aspects:

1. Payment for Order Flow (PFOF): This is Robinhood's main source of revenue. Robinhood routes customer trade orders (including stocks, options, and cryptocurrencies) to market makers (such as Citadel, Virtu, and other high-frequency trading firms), who pay Robinhood a rebate when executing these orders. Market makers profit from the bid-ask spread and share a portion of the profits with Robinhood. This model has drawn the attention of regulators, but Robinhood believes it provides retail investors with low-cost trading opportunities.
2. Net Interest Income: • Customer cash balance interest: Robinhood deposits customers' uninvested cash balances in banks and earns interest income from them. • Margin financing and securities lending interest: Charging interest to clients who use margin trading, as well as charging interest for lending clients' stocks to short sellers.
3. Robinhood Gold Membership Fee: Robinhood offers a paid subscription service called "Robinhood Gold," which provides members with additional features and benefits, such as larger instant deposit limits, professional research reports, lower margin rates, and more.
4. Cryptocurrency trading spread revenue: Although Robinhood does not charge direct commissions for cryptocurrency trading, it profits through the spread or rebates received from market makers. This means that customers pay a price that is slightly higher than the market buy price or slightly lower than the market sell price when buying and selling cryptocurrencies, and the difference constitutes Robinhood's revenue.
5. Other income: including stock lending income, debit card transaction fees, etc.

Robinhood's profit model, especially its "zero-commission" and payment for order flow model, has had a profound impact on the financial markets and retail investors: • Lowering investment barriers: The zero-commission model significantly reduces the cost for individual investors to participate in the stock and cryptocurrency markets, attracting a large number of young and novice investors into the market, promoting "financial democratization." • Promote market competition: The emergence of Robinhood has forced traditional brokerages to lower commissions or even offer zero-commission trading, thereby promoting competition and innovation across the brokerage industry. •Change the trading ecosystem: The order flow payment model has made market makers play a more important role in the market, while also sparking discussions about trading transparency and best execution. • User growth and activity: Through a low-cost and convenient trading experience, Robinhood is able to attract and maintain a large user base and high trading activity, which provides a foundation for its diversified profit model. • Risks and Controversies: The order flow payment model also faces regulatory scrutiny and controversy, primarily focused on potential conflicts of interest (brokerages may route orders to market makers that do not provide the best execution price for higher rebates) and the "hidden" impact on retail investors' trading costs. However, Robinhood and its supporters argue that this model allows retail investors to trade at lower costs and overall enhances market liquidity. In summary, Robinhood's profit model allows it to achieve profitability without charging traditional commissions, and by attracting a large number of retail investors, it occupies a unique position in the financial services sector. The growth of its cryptocurrency business has also become one of its important sources of revenue.

The cryptocurrencies mainly affected by Robinhood include: • Dogecoin (DOGE): This is one of the most influential cryptocurrencies on the Robinhood platform. During the surge in Dogecoin's price, both the trading volume and user holdings on the Robinhood platform were very high, and its influence on Dogecoin's price was particularly significant. •Bitcoin ( BTC ) and Ethereum ( ETH ): As the two largest cryptocurrencies by market capitalization, Bitcoin and Ethereum also have a significant trading volume and user base on the Robinhood platform. Robinhood's support for these two mainstream cryptocurrencies further solidifies their position among retail investors. • Other mainstream cryptocurrencies: Robinhood also supports trading of several other mainstream cryptocurrencies, such as Litecoin (LTC), Bitcoin Cash (BCH), and others. Although these coins may not have as much influence on Robinhood as Dogecoin, Robinhood's support still brings them additional liquidity and users.