Michael Wursthorn

speaker

1,567 appearances 29 recordings 1 series first heard Jul 2017 last heard Nov 2021

Michael Wursthorn’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Robinhood Is Easy to Use; Does That Make It More Risky? · 21 Aug 2020 podcast

But Robinhood made that very simple, easy to understand, and it opened up a whole world to them that they otherwise maybe would have never really had access to before this.

So there's a few different concerns.

One of them is that Robinhood obviously doesn't trade any commissions.

And that's been really revolutionary in the industry.

But the company still makes money on every trade.

And that's a conflict of interest, some securities experts have told us over the years.

The practice is known as payment for order flow.

So basically, whenever anybody enters a trade on Robinhood, that order is then routed through various market makers.

And those market makers, they have to...

There's certain rules that make sure that customers are getting as close to the best price as possible.

But there's a benefit.

There's a revenue stream that comes into Robinhood from that.

Just as an example, Robinhood made about $270 million just in the first half of this year off of that payment for order flow.

So commission-free trading does pay off in some aspects.

The other criticism I would say is just these nudges that I was explaining earlier in terms of the dark pattern with how traders proceed with confirming an order, the idea of a free stock, the confetti animation too as well where it's celebrating a milestone.

These are all slight nudges that might seem like they're just all minor at first glance.

But really, when you talk to some of these behavior experts, they explain that done as effectively as it is through Robinhood, these could lead people to trade more often, which tends to lead to bigger losses over time for traders, and also to take bigger risks that maybe they otherwise wouldn't have taken before.

Because trading on Robinhood is also fun, a lot of users say.

The main positive for sure is that Robinhood is a very simple interface.

And when you go on apps like Schwab or E-Trade, for example, you see a lot.

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