How Does Robinhood Markets Make Money?

How Does Robinhood Markets Make Money?

Robinhood Markets, the zero-commission online brokerage popular with millennials, is expected to go public next week trading under the ticker HOOD on the Nasdaq. The company will offer shares at between $38 to $42 apiece, potentially translating into a valuation of as much as $35 billion. In our dashboard Robinhood Markets Revenues: How Does HOOD Make Money? we provide an overview of Robinhood's business model and its key revenue streams. Parts of the analysis are summarized below. Robinhood is an online brokerage that offers commission-free trades of stocks, exchange-traded funds, and cryptocurrency. Although Robinhood doesn't directly charge its users for trades, it primarily makes money from market makers and frequency trading firms who pay for the order flow from its retail traders. Payments for order flow, or PFOF, accounted for roughly 75% of the company's revenue last year. Additionally, Robinhood also earns revenue from interest on securities and margins loans. The company also offers other services including the Robinhood Gold premium subscription service, which gives users access to features including professional research and margin trading. Robinhood has seen its transaction-based revenues grow 320% from around $170 million in 2019 to about $720 million in 2020. In Q1 2021, transaction revenues