On Thursday, Robinhood, an online investments platform, announced its launch in the U.K., marking the company's third attempt for international expansion. Robinhood's features will include the option to select from 6,000 U.S. stocks such as Tesla, Amazon and Apple, along with 24-hour trading for five days a week. Vlad Tenev, CEO of Robinhood, expressed his assurance in their success this time around while speaking to CNBC, stating that he is "confident [they] will be able to serve the customers here tightly."
Robinhood, an online investments app, has stated that it will launch its platform in the U.K. in the early part of 2024, making this the company's third attempt at international expansion. Users of the platform will be able to invest in 6,000 U.S. stocks and partake in 24-hour trading, which allows them to trade outside of the usual 9:30 a.m. ET to 4 p.m. ET bracket. Although U.K. stocks will not be available at launch, Robinhood plans to add them as it brings new products to the platform. Options and other derivatives will also not be available when the platform first launches. Jordan Sinclair, the U.K. chief of Robinhood, expressed that traders from the U.K. will enjoy 24-hour trading, as it will enable them to act upon market-moving news quickly. According to Sinclair, "Customers actually can make a trade and choose their investment strategy and actually act on that market news."
Robinhood has twice attempted to enter the British market. Over 300,000 people registered for a waitlist it launched in 2019 but the company then abandoned its United Kingdom growth plans due to the booming home demand resulting from the Covid pandemic, which led to a surge in retail investing. Last year, it endeavored to acquire the British crypto-trading app Ziglu, only for the venture to collapse and force Robinhood to record a $12 million impairment charge from the failed acquisition.
Starting Thursday, Brits can join a waiting list and be notified when they can gain early access in the future. In a bid to boost numbers more rapidly, Robinhood is urging its users to share a unique referral link with their acquaintances to receive priority. “It would make me the happiest if I could become one of the biggest employers in England,” Tenev declared. “There's a lot of great talent in that location so this could become a centre of excellence for Robinhood.”
Dan Moczulski, U.K. managing director of EToro, a rival stock trading platform, opined that the greater competition in the retail trading market represents "an exciting time for the industry." He shared with CNBC, “A higher number of rival firms will always be beneficial for investors. As one of the premier trading and investing platforms in the UK, it also obligates us to continuously innovate and increase our product range for our users.”
Vlad Tenev, CEO of Robinhood, commented in an interview with CNBC that he is not apprehensive about a repeat of the firm's earlier attempts to establish itself in the U.K. He declared that they have put a lot of effort into making sure everything is in order and the platform is far more substantial. As a result, Tenev is comfortable that they will be able to meet the customers' needs without any déjà vu.
Robinhood is receiving approval from the Financial Conduct Authority, the regulator in charge of the U.K. markets, and Tenev claims the company has a good relationship with the authority. Moreover, the FCA and the U.S. Securities and Exchange Commission have raised red flags about the use of "gamification" in investments. When queried by CNBC, an FCA representative said the regulator wouldn't give opinions on individual companies, although firms must comply with consumer protection regulations set out by the FCA.
Regulators are concerned about services like Robinhood, eToro, and Public, which use stimulating features such as push notifications, graphics, and a game-like interface, and might lead to excessive trading activities which can be detrimental to investors but profitable for market-makers. Customers' funds will be stored in accounts safeguarded by the FDIC insurance in the U.S., according to Robinhood, as opposed to the U.K.'s Financial Services Compensation Scheme. Robinhood users are eligible to receive a 5% annual yield on the cash kept in their accounts.
Rather than payment-for-order-flow in the U.K., which refers to the brokerage practice of routing trades through market-makers like Citadel Securities for a cut of the proceeds, Robinhood plans to attain revenue from other categories, such as securities lending, margin lending, return on uninvested cash, and its elite Robinhood Gold subscription service. Critics contend that payment for order flow can exasperate conflicts of interest, since brokers have a motivation to route orders to market makers furnishing such arrangements instead of prioritizing the interests of clients.
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