Commission-free share trading app Robinhood is launching in the UK for the second time, having failed to gain traction in 2020.
Robinhood in the UK
UK investors can only buy US shares through a general investment account at the moment.
Robinhood, a US-based commission-free share trading platform is launching a UK operation and the firm is in discussions with regulators, about securing the necessary permissions for it to be able to offer and manage ISAs alongside general investment accounts.
Robinhood hopes to be fully operational in the UK early in 2024 and will offer its customers 24-hour trading in 150 US blue chips and 5.0% deposit interest on free cash balances, held in a Robinhood account.
Robinhood in the US
Nasdaq-listed Robinhood, which trades under the ticker HOOD, was founded in 2013 and rose to prominence during the lockdown, as millions of furloughed or remote workers, with time on their hands, took up day trading. In turn, they were galvanised by online trading communities such as Wall Street Bets.
The explosive level of growth experienced by Robinhood was not without controversy, however, and the broker found itself at the heart of the meme stock mania and concerns about payment for order flow or PFOF.
Plus they do very well in options trading over there, which isn’t really a thing for private clients in the UK.
Scale, scale, scale
Robinhood grew astonishingly quickly in the US, growth that was boosted by lockdown and the mania around so-called meme stocks.
Even as those two drivers have faded away, Robinhood still has 23.3 million funded accounts.
According to data from the firm for October 2023, it has $84.60 billion of client assets in custody, turning over $50.8 billion worth of equities and it traded 96.60 million options contracts for its customers over the month.
To some extent, it has gone ex-growth in the US, having introduced crypto and options trading there, it likely needs a new outlet through which it can continue to grow.
Vlad Tenev Roinhood’s co-founder and chief executive said that the firm would:
“ Benefit from Britain’s low business taxes and “sophisticated” customer base”
He added that
“There’s definitely an embrace of technology and innovation that I think will make the UK continue to be a great place to do business.”
And he fired a warning shot across the bows of established brokers in the UK when he commented that
“ They were still charging large commission fees”
Somewhat ironically, Robinhood’s share price performance has been disappointing, to say the least, and its stock price has fallen by -68.0% in the last two years.
Having IPOd at $38.00 in July 2021, the shares now trade at $8.92, but they briefly traded at $85.00 in the immediate aftermath of the IPO.
UK brokerage markets are incredibly competitive already and Robinhood is only the latest in a long line of US brokers to open for business here. Rivals, Public.com, set up in the UK back in July, while Interactive Brokers have been here for 20 years.
We are all for competition and investor choice, however, as we have often said there are few winners, if any, in a race to the bottom, as far as pricing is concerned. Service levels can suffer when businesses seek to continuously drive down costs.