By Niket Nishant and Manya Saini
(Reuters) – Robinhood (NASDAQ:)’s entry into futures buying and selling this 12 months may very well be met with some warning by retail merchants utilizing its commission-free platform if it prices a payment, J.P. Morgan analysts mentioned on Thursday.
The corporate has not but disclosed its plans, however orders for futures and choices are sometimes costlier to execute than shares, which might lead to it charging a payment to cowl further prices.
The product is an important step in Robinhood’s effort to develop right into a full-fledged monetary providers supplier by being a platform of selection for retail buyers trying to dabble in additional complicated monetary merchandise.
Robinhood didn’t instantly reply to Reuters request for touch upon its rollout plan. It already prices 3 cents per contract for choices buying and selling tied to shares and exchange-traded funds.
J. P. Morgan analysts mentioned charging a payment for futures buying and selling would mark a “structural” distinction for the corporate identified for pioneering commission-free trades.
“We’re skeptical of success when contemplating the brand new economics of the (index choices and futures) choices,” J.P. Morgan mentioned.
“Given Robinhood’s worth proposition has been ‘commission-free’ buying and selling, we see this structural distinction that may necessitate a change in shopper habits presenting potential adoption threat.”
As a part of its development push, Robinhood has through the years rolled out retirement accounts and a bank card. It has additionally made margin investing – a riskier type of buying and selling – cheaper and diversified its enterprise by means of acquisitions.
GAINING MARKET SHARE
Robinhood CFO Jason Warnick mentioned on Wednesday the corporate has been gaining market share in choices buying and selling linked to shares and exchange-traded funds.
Choices income surged 43% to $182 million within the three months ended June 30, whereas the variety of choices contracts traded jumped 38%.
“We have now a number of main benefits relative to what you see elsewhere within the choices market,” CEO Vlad Tenev mentioned.
In comparison with its 3 cents per contract cost for choice merchandise, Tenev mentioned, “Most of our rivals cost $0.65 a contract, which might add up if you happen to’re an energetic dealer.”
