(Bloomberg) — Robinhood Markets Inc is launching commission-free stock trading in the UK, marking the international debut of the company that benefitted from the “meme-stock” frenzy of the Covid pandemic.
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The Silicon Valley-headquartered firm has started rolling out trading of more than 6,000 US-listed stocks and other securities to British retail investors. For now, users must join a waitlist to get switched on, but the service aims to be immediately available starting in 2024.
At a time when retail investors’ enthusiasm for stocks has cooled, Vlad Tenev, Robinhood’s chief executive and co-founder, says he wants to shake up the UK market.
“We’d like to help lower fees for all customers in the UK, just like we did in the US back in 2019, right before Covid,” he said in an interview with Bloomberg News.
He’s offering 5% interest on uninvested cash, trading outside of market hours, as well as zero trading commission or currency fees to local users with as little as $1 to invest.
With its sleek, game-like app, Robinhood’s rising popularity with first-time investors helped drive established US brokerages to slash their commissions for online trades to zero.
But as the company grew, it faced increasing scrutiny from regulators who’ve accused it of enticing some customers to take on more risk that they could manage. During the pandemic, the company took a starring role in the subreddit-driven short squeeze on shares like GamesStop Corp, that ultimately left a raft of large US hedge funds bruised.
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The pioneer of commission-free trading apps has had the UK in its sights since 2019 — most recently via the now-scrapped acquisition of London-based crypto trading firm Ziglu.
The company will be joining an increasingly crowded market, competing with locals like Revolut and Freetrade as well as New York-based rival Public.com, which expanded to the UK in July.
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Tenev said Robinhood’s infrastructure and experience in the US give it an edge.
“The fact that we’ve built this platform from the ground up and we’re a technology company and financial services, not a brick and mortar institution, I think makes us more able to expand internationally in ways that traditional financial institutions can’t,” he said.
The company also plans to start offering crypto trading in the European Union over the coming weeks.
In the US, Robinhood makes part of its revenue through payment for order flow, a controversial practice, which was banned in the UK, where market makers pay brokerages to route orders through them, rather than directly to stock exchanges.
“The goal for the UK is to take advantage of all the other ways we have of generating revenue, sans payment for order flow,” Tenev said. “And because we’re leveraging the same platform that we have in the US that we’re building to be applicable globally, the incremental costs of servicing each new market should be low.”
Robinhood’s transaction-based revenues fell 11% in the third quarter compared with the prior year to $185 million, largely due to lower crypto volumes, which tumbled 55% on the year. The company’s shares are up about 10% this year, but still 90% lower than their peak.
Robinhood has diversified its sources of revenue through various products such as securities lending and its premium paid account, Robinhood Gold, which offers additional features. Tenev said the firm was working on launching a credit card in the US.
As well as stocks, Robinhood offers its 23 million US customers trading in exchange-traded funds and cryptocurrencies.
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