Robinhood raised $ 331 million from customer trading activities in the first quarter

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Robinhood posted record consumer store sales in the first quarter of 2021 as the retail juggernaut neared its public debut.

The millennial-favored stock trading app raised $ 331 million in the first quarter of 2021 for the flow of orders that the money brokerage firms receive to direct client trades to market makers.

This compares to the $ 221 million Robinhood made from paying the flow of orders in the fourth quarter of 2020 and the $ 91 million made in the first quarter of 2020.

Robinhood and others in the online brokerage industry rely on what is known as payment for the flow of orders as a source of income rather than commissions. The business model of Robinhood, the “free trade” pioneer, relies on back-end payments when there are no commissions.

Market makers like Citadel Securities or Virtu pay e-brokers like Robinhood for the right to conduct client trades. The broker receives a small fee for the routed stocks, which can add up to millions if clients are as active as they did this year.

Robinhood – which is slated to go public on the Nasdaq in the first half of 2021 – paid $ 133 million for the flow of orders from stock deals, while $ 198 million came from options trading.

The order flow boom coincided with record retail activity and new customer accounts across the industry.

The Silicon Valley startup found itself in the middle of a firestorm in January in the midst of the brief bottleneck at GameStop, which was partly fueled by Reddit-driven private investors. JMP Securities estimates Robinhood gained nearly 6 million new customers in the first two months of the year.

Paying for the flow of orders is a common practice, but it is often criticized for a lack of transparency. The GameStop commercial frenzy shed light on the source of income and many lawmakers scrutinized the practice. Main Street argued that Robinhood had reasons to encourage more trade.

Over the weekend, legendary investor Warren Buffett said Robinhood had “become a very important part of the casino, the casino group that went public in the past year and a half”.

Robinhood refuted that “people are fed up with the world’s Warren Buffetts and Charlie Mungers who act like they are the only oracles of investing.”

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– With reports from Kate Rooney of CNBC.

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