On Thursday, Robinhood, an online investments app, announced that it is launching its platform in the U.K. The firm's venture into international expansion is its third attempt. Features of the company include an option to pick from 6,000 U.S. stocks including Tesla, Amazon, and Apple as well as 24-hour trading throughout the week. Vlad Tenev, CEO of Robinhood, told CNBC that he is positive about the launch in the U.K. and is "confident we'll be able to serve the customers here tightly."
Robinhood has announced plans to launch its online investments platform in the U.K. in early 2024. Among the features is the ability to buy 6,000 U.S. stocks and conduct trades 24 hours a day, five days a week. This is an upgrade from the current U.S. offering, which allows trades to be done outside regular market hours. Unfortunately, U.K. stocks won't be included at launch, and options and derivatives won't be available either.However, Robinhood's U.K. chief Jordan Sinclair believes the new 24-hour trading feature will prove popular with investors who want to take advantage of market-moving news without waiting. He said, "Customers can actually make a trade and choose their investment strategy and actually act on that market news.”
Robinhood has twice attempted to penetrate the U.K. market. Last year, a waitlist that saw more than 300,000 people sign up was put in place, but due to the Covid pandemic, the company changed its plans. To add to this, the acquisition of British crypto-trading app Ziglu ultimately failed, and Robinhood had to write off the investment and incur a $12 million impairment charge. Starting on Thursday, British citizens can join a waitlist in anticipation of early access at a later date. To accelerate its movement up the queue, Robinhood is requesting that users share their unique referral link with others. Tenev, the CEO, hopes to make the U.K. a centre of excellence for Robinhood. Dan Moczulski, U.K. Managing Director of rival stock trading platform EToro, stated that the presence of more competition in the retail trading domain is an exciting moment and will be beneficial to investors. He added that it will prompt EToro to continue innovating and expanding their product selection for users.
Vlad Tenev, CEO of Robinhood, expressed his confidence that the third time will be the charm in the company's attempt to extend into the U.K. market. He told CNBC in an interview that they've left no stone unturned in making sure the platform is up-to-the-minute reliable. "We're very confident that we'll be able to provide the customers here with a great service," he said.
Robinhood has been granted a license from the Financial Conduct Authority (FCA), the U.K.'s markets regulator, and Tenev states there is a good rapport between the two parties. The FCA and the U.S. Securities and Exchange Commission have both expressed worries regarding the "gamification" of investments. Accordingly, when inquired by CNBC, a spokesperson from the FCA commented that companies need to conform to the consumer duty standards established by the regulator, while refusing to provide details on individual entities.
Regulators are concerned that brokerage applications such as Robinhood, eToro, and Public, which feature attractive elements such as breaking notifications, vivid visuals, and a gaming-style interface, may possibly induce investors to excessively trade, thereby profiting market makers at the expense of the investors.
In order to protect cash held in the accounts of users, Robinhood stated that it would employ the U.S. Federal Deposit Insurance Commission insurance instead of the U.K. Financial Services Compensation Scheme. As well, Robinhood users are able to get an annual return of 5% on the cash in their accounts.
Finally, Robinhood will not initiate the payment-for-order-flow in the U.K., which is a system that entails executing trades via market-makers like Citadel Securities in exchange for a portion of the gains. This type of practice is prohibited in the U.K. Conversely, the organisation is looking to make money from other sections of its business, including securities lending, margin lending, interest on uninvested funds, and the premium service Robinhood Gold.
However, critics claim that payment for order flow can lead to discrepancies in interests since brokers will have an incentive to route orders towards market makers that are offering such deals over the welfare of their customers.
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