Robinhood, the company that owns the zero-brokerage fee app that shares the same name has announced the launch of its own Clearing company.
Robinhood announced that it has the clearing system is complete and has been rolled out as a new company called Robinhood Securities. The company previously announced that it would use the new platform to eliminate the need for third-party clearing services. Third-parties usually charge fees that trickle down to the traders, and eliminating such fees means traders no longer have to be burdened by hefty fees.
Introducing Clearing by Robinhood. It’s the only clearing system in the last decade to be built from scratch.
For you, this means:
Improved customer support
A better overall experience
Read more about Clearing by Robinhood here: https://t.co/bKTfEvme2g pic.twitter.com/nA4QebTqAo
— Robinhood (@RobinhoodApp) October 10, 2018
Cost savings is the main goal
The previous system had a $30 fee but the new Robinhood system but the new system will reduce the fee to $9. Robinhood Securities will also redesign tax documents, monthly account statements and proxy notices to facilitate an easier language. Vlad Tenev, the company’s CEO revealed that the pursuit for a new Clearing Firm is mainly for cost saving purposes.
“Since we’re no longer depending on a third party, we basically control our destiny,” stated Mr. Tenev.
Robinhood also revealed that its new clearing agent will handle various aspects that include trading functions, bookkeeping, and centralized cashiering. It will also deliver and receive securities purchased or sold by customers and distribute dividends. The platform will also process exchange offers, redemptions and tender offers.
The announcement about Robinhood Securities rollout comes weeks after a Bloomberg report which suggested that Robinhood earns 40 percent of its revenue from the sale of user data. The report stated that the company sells the data to major trading firms in a practice known as payment for order flow.
Robinhood might be going public sometime soon
Robinhood’s net value was around $5.6 billion just five months ago and the company is reportedly planning to go public although it has not announced an IPO launch date. Robinhood has been growing rapidly courtesy of its plan to disrupt the legacy financial services industry. It has even influenced major firms such as JPMorgan Chase to discount their services. Clearly, the zero-commission strategy has been working incredibly well for Robinhood and things are likely to get even better with the new clearing company.
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