Robinhood Introduces Zero Comissions for Crypto Trades!

I think this should have been the headline of the day with Robinhood today 6/3/2021 announcing zero commission fees for trading cryptos on its platform. Although Robinhood does not have a ton of cryptos to trade the fact that it is zero fees is huge! How huge?

Zero Commissions Fees

Robinhood when first launched it had many features to entice younger generations to invest in the stock market. The so call gamification features the app made for stock trading allow many younger traders to get hooked into investing. Another big incentive for using Robinhood is that traders pay zero commission fees on stock trades. Furthermore option trades per contract were also zero commissions. Robinhood started official launch in 2015 and today has estimate of over 20 million customers.

The way Robinhood is able to get zero commissions fee lies in the relationships they have with the clearing house firms and they earn their fees through payment by order flow. In laymen terms when retail investors put on an order on Robinhood, Robinhood takes the order and transfer it to companies that had prior negotiated with Robinhood on a set fee to get the retail orders from Robinhood. That way the companies can take the other side of the retail trade or transfer it to specific banks that would accept the other side of the trade. The fees Robinhood earns would maintain zero commissions for its customers.

As Robinhood rose in popularity well established brokerages and banks such as Charles Schwab, Fidelity, Think or Swim, TD Ameritrade, ETrade and many others began to follow suite with zero commissions on trades. The end result it force an entire market to trading market to have its trading fees cut down to negligible or even zero to compete with each other.

The lower commissions costs and ease of trading allowed many more participants into the markets over the years since. Charles Schwab one of the longest established brokerages went to free commissions in late 2019. Within the year many of the other brokerages followed suite. However this all is likely started with Robinhood as it was the first ever to offer commissions free trading.

Conclusions

This is a paradigm shift with zero commissions fees in crypto trading as it happened to stock trading. Stock trading existed for over 100s but it took until 2015 when Robinhoods came out to have commissions fees be zero. Now the stock market is trading the more options on a daily basis than stock shares. The crypto trading market will follow with demand as fees are now zero commission fees at Robinhood.

Marketwatch News Source Article

Chart above is a clear indication of what users will benefit for using Robinhood compares to other crypto exchanges as of today. The fees for crypto trading are zero. What will be difficult to realize though is the payment order flow may not get prices filled at ideal prices for retail. However that can still be subjective and timing matters. For now the whole theme of zero commissions in the crypto space is another incentive moving forward for retail traders who are willing to invest in crypto.

None of this is cryptocurrency investment advice. This is for entertainment purposes only. Thanks for reading.