How Zero Commission Stock Trading Is Set To Become The Norm

Exactly what do traders pay roughly $8 commission for on stock trades?

Rake-off for getting in and out of stock trades can be a limiting factor on the number of trades made, particularly if you are a smaller day trader where the commission can very quickly diminish your profit. If only someone would take from the rich and give to the.. ahem.. poor.

Enter Robinhood, brainchild of Stanford alumni Vlad Tenev and Baiju Bhatt who went about building the trading app which allows users to trade commission free. Sounds fairly straightforward but the scale of the project from a security and regulatory viewpoint has not made it an easily exploited gaping whole in the market.

The pair spent two years drumming up interest in the app with 500,000 potential users before going to investors with the pent up demand and raising $16m from A list VC powerhouses like Google Ventures to develop the app for commercial use and, most importantly, ensure that users data and funds were fully secure.

Robinhood is now a fully registered broker-dealer and member of FINRA and SIPC, bobbling around the same regulatory pools as brokers which operate in the world of voice brokerage and offices yet with the focus on full automation whilst making their revenue mainly through interest from client held funds rather than providing advisory services.

The guys from Techcrunch caught up with Tenev and Bhatt in December to demonstrate how easy the app is to use. From the Techcrunch review below, the app uses fingerprint ID to sign in with a well laid out user interface displaying the account holders portfolio in a list format with a choice of time tracked graphs for historical data on different holdings.

In addition to a smooth and logical user experience, Robinhood seem to have got a hell of a lot right so far, drumming up demand before release and getting the product pin point perfect when it was released to the app store at the end of last year. The trajectory of use for Robinhood also means that the investment of the VCs might be the best belief in the platform yet.. underpinning the exponential number of trades which went through Robinhood throughout December.

 

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About Gary Donovan

Machine Learning and Data Science blogger, hacker, consultant living in Melbourne, Australia. Passionate about the people and communities that drive forward the evolution of technology.
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