Start-up brokerage Robinhood Markets Inc. has attracted around six million users with its smartphone app and commission-free trades. However, the brokerage takes sizeable rebates for directing clients’ orders, a practice known as "payment for order flow", which potentially offsets the benefits of zero trading commissions. The app is therefore likely to be executing trades at a slightly higher price than other brokers, according to market veterans.
Start-up brokerage Robinhood has attracted around six million users with its smartphone app and commission-free trades. However, the brokerage takes sizeable rebates for directing clients’ orders, a practice known as "payment for order flow", which potentially offsets the benefits of zero trading commissions. The app is therefore likely to be executing trades at a slightly higher price than other brokers, according to market veterans.