Silicon Valley to Disrupt Wall Street? Fintech Startup Launches Commision-Free Trading App

In great news for American penny-saving stock traders, the much-hyped startup Robinhood has finally released an iPhone app on the 11th of December, 2014. The new service offers a slick interface, zero commissions for US-listed securities and it does not require any minimum deposit.

Robinhood, which was announced last December, is Silicon Valley's latest attempt to disrupt the American Stock Brokers Stock Brokers A stock broker is a company, individual, or entity that is authorized to buy and sell stocks or other financial instruments. Brokers’ main function includes buying and selling orders on a trader’s behalf. Through innovation and a byproduct of us residing with the technology era, more and more traders are beginning to open brokerage accounts with online brokers.In the past, many brokers accrued money through charging a commission on every trade but as competition has strengthened and technology h A stock broker is a company, individual, or entity that is authorized to buy and sell stocks or other financial instruments. Brokers’ main function includes buying and selling orders on a trader’s behalf. Through innovation and a byproduct of us residing with the technology era, more and more traders are beginning to open brokerage accounts with online brokers.In the past, many brokers accrued money through charging a commission on every trade but as competition has strengthened and technology h Read this Term business model. They plan to grab young people away from online brokers such as E*Trade and TD Ameritrade by promising they will no longer be paying up to $10 per trade.

The revenue is meant to come by offering additional premium services, known as the "freemium" model, popular with mobile and web apps. For example, Robinhood will charge for margin trading.

In the announcement on the firm's blog, they take aim at the biggest brokers directly by saying: "The markets are a complex system of Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term that may seem daunting to new investors, and with the financial crisis, distrust in Wall Street has never been higher. Traditional brokerages -- many of them established in the 1970’s -- have been slow to adapt to new technologies. Many still rely on paper-based accounting and the few that have mobile applications, are built off of archaic interfaces."

The firm says that almost half a million people signed up to join Robinhood over the past year. While this sounds like a great marketing success it also raises the serious issue of the app's long waiting list. So many people have been waiting since it was announced and they now only launch an iPhone app a year later. Android and Windows Phone versions might come out eventually but in the meantime many fans feel left out by waiting for over a year and then not all getting what was promised.

The startup has raised $16 million so far from influential venture capital funds such as Google Ventures and Andreessen Horowitz as well as celebrity investors Snoop Dogg and Jared Leto.

The offer of zero commission stock trading is not new in the American stock markets. Previous attempts have fallen short in gaining the large user-base needed to earn enough from premium services only, as more wealthy investors require that the broker will likely survive in the long term to trust it with their savings. It remains to be seen if the major backing of Silicon Valley will help Robinhood succeed where others have failed.