{"id":82268,"date":"2023-11-08T17:00:47","date_gmt":"2023-11-08T22:00:47","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/robinhoods-u-k-expansion-will-test-business-model-minus-a-key-revenue-source\/"},"modified":"2023-11-08T17:00:51","modified_gmt":"2023-11-08T22:00:51","slug":"robinhoods-u-k-expansion-will-test-business-model-minus-a-key-revenue-source","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=82268","title":{"rendered":"Robinhood&#8217;s U.K. Expansion Will Test Business Model, Minus a Key Revenue Source"},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-BAR-0000795194\">\n<div data-layout=\"wrap\n              \" data-layout-mobile=\"\" class=\"\n        media-object\n        type-InsetMediaIllustration\n          wrap\n  article__inset\n        article__inset--type-InsetMediaIllustration\n          article__inset--wrap\n    article__inset--lead\n  \"><\/p>\n<p>        <!-- eventually when we know what this card will be we can change it and leave this one --><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        img-wrap\n        article__inset__image\n      \" itemscope=\"\" itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<\/figure><\/div>\n<p>\n        Robinhood<br \/>\n       has said that banning the payments it gets from financial middlemen would threaten the existence of free stock-trading. The company is about to test that theory itself, as it makes its first international expansion into a country that already bans the practice.<\/p>\n<p>\n        Robinhood Markets<br \/>\n      (ticker: HOOD) said Tuesday it is on track to launch trading in the U.K. by the end of the year. The announcement came after a disappointing third-quarter earnings report, which sent the stock down 15% during Wednesday\u2019s session.<\/p>\n<div class=\"paywall\">\n<p>The catch is the U.K. doesn\u2019t allow payment for order flow. That was Robinhood\u2019s key revenue generator as it became the country\u2019s fastest-growing brokerage ever during the pandemic, making up more than 80% of revenue in some quarters. The brokerage has repeatedly defended the practice against threats to restrict or ban it in the U.S.\u00a0<\/p>\n<p>Payment for order flow describes a system where a broker routes customer orders to market-makers that trade stocks, exchange-traded funds, and cryptocurrencies for them, and then make money off the spread between the bid and ask. The market maker sends a portion of that spread back to Robinhood. Other brokers also make money this way, though some like Fidelity have limited the practice. Securities and Exchange Commission Chairman Gary Gensler has said that collecting these payments can be a conflict of interest for brokers. Critics contend the payments incentivize brokers to push customers to trade more, because the more trading that happens on their platforms, the more money they make.<\/p>\n<p>Gensler had told <em>Barron\u2019s<\/em> in 2021 that the SEC was considering banning payment for order flow. Robinhood pushed back at the time, saying the practice allowed brokers to offer free trading, instead of charging customers for each trade they make. Without it, some brokers would likely bring commissions back, Robinhood Chief Legal Officer Dan Gallagher told <em>Barron\u2019s<\/em> at the time.\u00a0<\/p>\n<p>The SEC\u2019s latest proposal to change how trades are executed could limit how much payment for order flow brokerages receive, though experts doubt a full ban will be implemented.<\/p>\n<p>The U.K. expansion, however, shows that Robinhood is confident it can make money even without payment for order flow. Part of the reason for such confidence might be that Robinhood has somewhat reduced its reliance on payment for order flow as interest rates have risen. The company\u2019s net interest income is now its largest source of revenue.<\/p>\n<p>Robinhood CFO Jason Warnick said on Tuesday the company expects to make money in the U.K. from other sources, including securities lending, margin lending, interest on uninvested cash, and its premium Robinhood Gold service that offers investors higher interest rates and other benefits. <\/p>\n<p>\u201cWe\u2019re optimistic that we can build a large and growing business there over time that\u2019s eventually profitable,\u201d Warnick said. It could be \u201ca couple of years\u201d before the U.K. business becomes profitable, he said. Robinhood hasn\u2019t yet posted an annual profit after a decade of operation, but analysts expect the company to be profitable in 2024.<\/p>\n<p>Write to Avi Salzman at avi.salzman@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/articles\/robinhood-markets-stock-uk-expansion-cade03e6?mod=markets\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Robinhood has said that banning the payments it gets from financial middlemen would threaten the existence of free stock-trading. The company is about to test that theory itself, as it makes its first international expansion into a country that already bans the practice. Robinhood Markets (ticker: HOOD) said Tuesday it is on track to launch [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":82269,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-82268","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Robinhood&#039;s U.K. Expansion Will Test Business Model, Minus a Key Revenue Source | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Robinhood has said that banning the payments it gets from financial middlemen would threaten the existence of free stock-trading. 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