I’m not super interested in the whole GameStop fiasco, but a paragraph in a New York Times piece caught my attention last night. A lot of the trades that have sent GameStop into the stratosphere were made via Robinhood, a trading app that charges no fees. So how do they make money?
Without fees, Robinhood makes money by passing its customer trades along to bigger brokerage firms, like Citadel, who pay Robinhood for the chance to fulfill its customer stock orders.
Wait. Robinhood can’t make money with $0 fees, but Citadel can apparently make money with essentially negative fees. I’m no high finance guy, but what am I missing here?