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With 13 million users, Robinhood is a popular trading application where people can invest in stocks, ETFs, and options without any fees. It is developed by Robinhood Markets, Inc, one of the most successful tech startups on Wall Street which is expecting to go public in early 2021.听
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Data Sharing:
One听of the听key听selling points听of Robinhood is that the users do not have to pay any commission fees听to trade. Therefore,听Robinhood Inc.听has alternative ways to make money 鈥� selling data to financial companies. It was reported that the California-based trading platform charges large investment firms听including听Citadel Securities, Virtu, G1 Execution Services, Wolverine and Two Sigma to access real-time information about which stocks Robinhood鈥檚 users are buying and selling [2].听听
In this way, the large investment companies听can听research the investing behavior of the retailing customers, and they could come up with solutions to profit from the financial markets. This leads to a conflict of interest.听On one hand, Robinhood promotes that it is helping the retailing investors to gain from the financial markets; on the other hand, it is helping the institutional investors听by informing them of听how the retailers are investing听in order to听profit from听the information.听听
Restricted Trading:听
On听January 28th, 2021,听Robinhood Market Inc. restricted users from buying shares of companies including GameStop Corp. (GME), AMC Entertainment Holdings Inc (AMC), and BlackBerry Limited (BB). After the trading halt, some users speculated that Wall Street hedge funds prompted the trading app鈥檚 decision [2].听
Though the CEO of the Robinhood Market Inc. Vlad Tenev denied the statement and said听that the decision听鈥渨as entirely about market dynamics and听clearinghouse听deposit requirement, as per regulation,鈥澨齪eople still doubt his words听due to听Robinhood鈥檚 relation with Citadel and similar companies [1].听
Conclusion
Although Robinhood is depicted as a controversial app that collects user data and profits from sharing the data with large investment companies, it opens听a straightforward way听for retailers to trade conveniently.听When determining which method to use for听trading, it is highly recommended that users conduct research into which permissions they allow applications to gain. There are multiple options听for trading, such as using banking institutions, however听as we听learned, data听protection is听not guaranteed. The term 鈥榖uyer beware鈥� is a听tremendously听important aspect to consider, especially when deciding which听institution听you allow access to your finances.听
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[1] Aten, J. (2021, January 28). Robinhood is the Facebook of INVESTING. you're the data, not the customer. Retrieved February 18, 2021, from听听
[2] Douglas MacMillan, Y. (2021, January 30). Robinhood and citadel's relationship comes into focus as Washington vows to examine Stock-market moves. Retrieved February 18, 2021, from听听
