'Free Trading' Robinhood Triples Profits by Selling Customer Trading Data

$331 Million Profit from Q1 Customer Trading Data Sales
Individual Transactions Surge Over 300% Year-on-Year
Buffett Criticizes, "Turned Stock Market into a Gambling Den"

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The free stock trading app 'Robinhood,' used by individual investors in the United States, has reportedly made significant profits by utilizing customers' trading information. As Robinhood is currently one of the most anticipated companies in this year's U.S. initial public offering (IPO) market, related controversies are expected to intensify.

The Wall Street Journal (WSJ) reported on the 2nd (local time) that Robinhood earned $331 million (approximately 369.4 billion KRW) through the sale of 'Payment for Order Flow (PFOF),' which is trading information from individual investors. This represents an increase of over 300% compared to the $91 million profit in the first quarter of last year.

The rise in the stock market, which increased the number of investors, along with increased trading of specific stocks such as GameStop, is analyzed to have boosted Robinhood's profits. The increase in individual trading expanded the amount of information Robinhood could sell, resulting in substantial revenue.

WSJ stated that although Robinhood has revenue sources such as the paid service 'Gold' and short-selling lending fees, PFOF accounts for the majority of its income. Despite criticism of this practice, WSJ evaluated that Robinhood maximized profits by leveraging its customers.

Robinhood, despite offering commission-free trading, did not disclose how it generates revenue, leading to an investigation by the U.S. Securities and Exchange Commission (SEC). The SEC investigated Robinhood on charges of deceiving customers and concluded that although Robinhood's customers did not pay stock trading commissions, they ended up incurring an additional cost of $34.1 million. Robinhood agreed to pay a $65 million fine last year to settle the investigation. At that time, Robinhood explained, "This settlement concerns past practices and is unrelated to current operations."

The SEC still holds significant authority. WSJ reported that in March, the SEC informed Congress that it is considering reviewing the oversight of PFOF trading.

Meanwhile, billionaire investor Warren Buffett strongly criticized Robinhood at the Berkshire Hathaway shareholders' meeting held the day before, stating that Robinhood has turned the stock market into a speculative arena.

This content was produced with the assistance of AI translation services.