Robinhood Cuts Margin Interest Rates by Half to 2.5%

Commission-free broker, Robinhood announced on Monday that it has slashed the annual margin interest rates on its premium accounts from the previously charged 5 percent to 2.5 percent.

The updated rates will be available to 'Robinhood Gold' traders who pay a monthly fee of $5 for the premium services.

This move came as the California-based company is considering to cut investment rates further: it already disrupted the retail trading industry with its commission-free model, which forced the established platforms to offer zero-fee services.

“By lowering our margin rate, we’re taking another step in passing the most value back to our customers,” Robinhood stated.

Disrupting the Retail Trading Industry

Founded in 2013, Robinhood lured a new bread of retails traders, mostly from the young generations. The mobile-based trading app gained massive popularity during the Coronavirus Coronavirus The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry. Brokers have been forced to quickly adapt to several changes, both positive and negative.This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020. This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.In conjunction with uncertainty caused by the virus, The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry. Brokers have been forced to quickly adapt to several changes, both positive and negative.This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020. This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.In conjunction with uncertainty caused by the virus, Read this Term lockdown when many ideal youngsters steered towards the volatile stock market.

The reading platform has around 13 million customers and is valued at $11.7 billion. Additionally, it is gearing up for an initial public offering (IPO) next year with the appointment of investment banking giant Goldman Sachs and is looking at a listing valuation of $20 billion.

Despite the massive success, Robinhood attracted massive criticisms. The app was blamed for the ‘gamification’ of retail trading that is attracting inexperienced traders. Moreover, it is facing a probe by the Massachusetts securities regulators for failures in protecting inexperienced traders and aggressively promoting its products.

Furthermore, the US Securities and Exchange Commission (SEC) slapped a $65 million fine on the brokerage app recently over its failure to fully disclose its practice of selling clients’ orders to Market Makers Market Makers Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Market makers or called dealing desk brokers represent a type of broker that internalize flows and are taking the opposite side of a transaction submitted by their clients. The market making broker is only quoting a feed of prices to its clients. These feeds may or may not be the exact same as the prices quoted on the interbank market.Any order a client enters is processed internally and never goes out to the market, except in rare cases where a market making brokerage identifies a client as a v Read this Term.