Robinhood: A Zero Commission Stock Brokerage

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Feb. 20 (Bloomberg) -- Robinhood Co-Founders Vladimir Tenev and Baiju Bhatt discuss the future of trading stocks on Bloomberg Television's "Bloomberg Surveillance." (Source: Bloomberg)

It is great to be here, first of all.

One of the things that we are able to do because of the high level of automation that engineers are building into the platform is run very, very lean, so we have the ability -- you are running so lean you're not charging commission.

I mean, that is lean.

The algorithms are going to -- the interesting thing is that it does not cost much money to process a trade.

A purely electronic transaction.

So the majority of what those commissions are going for through the online brokerages are toward brick-and-mortar stores, large advertising budgets, people answering phones -- but baiju, you guys still have to pay for the lights.

You have got to put food in your mouth.

Explain how making money off margin loans is going to work.

You can think of it as a premium model, right, so there are a lot of traders out there that like to trade on margin.

When you percent of the assets -- 20% of the assets.

We get the ability to short sell or take their holding the buy more with them and weeks in the capital to do so.

I have got enough gray hair were i've seen this 25 times.

What is the differential with you guys?

You are smart, smart map guide, physic majors, you code an eight lane with us.

So what?

You are up against e trade, scottrade, and the rest of them.

That is a great question.

It is really important to point out that this idea brokerages operating with effectively zero transaction costs is not a new thing.

If you look at the electronic trading world where hyper trading happens, that has been the norm for a long time.

And so you are bringing high trading efficiencies to the regular person?


I would think young people would be really interested in your product because they do not have a fee but they do not have a lot of money to trade.

Are they really want to be trading on margins?

That if the thing.

We are excited about sort of a lot of our users are growing up and becoming customers of ours for a very long period of time, so if they are not necessarily using margin or other premium features we have on day one, we are ok with that because these people will stay around.

David kirkpatrick with us.

How much have you raised to finance this?

Somebody is paying something.

Weisel global ventures, right?

-- google ventures, right?

We raised some money in the round.

Will there be a cross-selling opportunity down the road beyond what you're talking about?

Will this lead to other businesses?

Is this a loss leader kind of thing?

Zero commission trading as our first big thing, but i think we have a lot of things other than a zero commission that will differentiate us down the line.

Can you actually name those 4s, vlad?

-- for us, vlad?

To tom's point, we want to know what differentiates you.

Margin balances, what else?

Robinhood is a mobile-first product, so it is really designed to deal and work great on a mobile device, and that is where we see sort of a big need in the market.

What has been the response from major wall street to this.

The idea -- i have got an iphone and i am bringing high frequency trading efficiencies to a commission-free aspect.

Had anybody from wall street out 1-800-robinhood and said hi, guys, are you having strawberries and chocolate?

What is your response to this?

It has been interesting.

I think a lot of people are somewhat epochal about it, some people as they have learned more about the business realize that it is not that unusual for transactions to not cost anything.

A kind of realize that if you build a system where there is not significant overhead per account, like there is not a human involved, like it, moving papers around back and forth, that it actually works pretty well.

So remain dollars from index ventures.

How long do you think until they recoup their cash?

We are looking to raise another round of funding this year, so we will see.

I think all of our investors are excited about this for -- we are ready -- you are a member of finr a. does that mean the people who are on the waitlist will be able to trade anytime soon?

Updates on that coming fairly soon.

Come on.

Help me out here.

We are well aware of the demanded we are working as hard as we can to get the product to those people as quickly as possible.

All right.

A good problem to have, by

This text has been automatically generated. It may not be 100% accurate.


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