Robinhood Markets Inc. beat out a number of its largest rivals in June based on a key trading statistic disclosed for the first time by the unicorn brokerage.
The Menlo Park, Calif.-based company, which operates a free-trading app in the U.S. that has seen tremendous growth in recent years, saw daily average revenue trades of 4.31 million in June, with three of its heaviest trading volume days coming that same month, a Robinhood spokesperson said in an email. DARTs in the entire second quarter, which the spokesperson declined to quantify, were more than double the first quarter's total.
By comparison, TD Ameritrade Holding Corp. posted average trades per day among its customers of 3.84 million in June. E*TRADE Financial Corp.'s DARTs in June totaled more than 1.1 million. And Interactive Brokers Group Inc., whose users tend to be more active traders than those at other retail brokerages, reported DARTs of 1.86 million in June. A spokesperson for Charles Schwab Corp. did not respond to a request for the brokerage's DARTs data in June, though Bloomberg News reported that its total was 1.8 million.
As stocks have climbed out of the depths of the coronavirus pandemic-induced market meltdown earlier this year, mom-and-pop investors — the intended clientele of Robinhood, TD Ameritrade, E*TRADE and others — have become a driving force for a large part of the U.S. equity market's trading activity. High-speed trading firm Virtu Financial Inc. is one of several companies that executes retail investors' orders on behalf of brokerages, including Robinhood. Speaking on a quarterly conference call Aug. 7, CEO Doug Cifu proclaimed that the rush of retail trading activity is part of a "broader structural change" and not a "short-term phenomenon."
Retail investors are estimated to have accounted for up to 20% of trading activity at various points in the second quarter, according to Virtu, marking the likely result of an amalgamation of catalysts.
While Robinhood has offered free stock trading on its app since its founding, TD Ameritrade, E*TRADE, Interactive Brokers and Schwab only began offering such access in late 2019. The coronavirus-induced stay-at-home orders across the country have been widely cited as another reason behind the increased participation among everyday investors. Analysts from Société Générale have written that the increase in "cheap" stocks from companies that have been put under pressure by the pandemic has also contributed to the increased retail participation in the market.
The swelling participation among retail investors in the U.S. stock market has raised concern about how brokerages like Robinhood are educating their users, though. Those concerns were amplified in June when news broke that Alex Kearns, a 20-year-old student from the University of Nebraska, died by suicide reportedly believing that he owed almost $750,000 after trading options contracts on Robinhood. The brokerage has since overhauled options trading on its platform, including by adding educational content and improvements to its user interface, and has said it is considering higher criteria to trade options, it detailed in a June blog post.
Robinhood has also worked to diffuse the notion that it is a new haven for day traders. The company recently pulled access to data on what stocks its users were most actively trading, according to Bloomberg News. For its part, Robinhood says the majority of its user base approaches trading on its app with a "buy and hold" strategy.
"As customers spend more time on the platform, most of them buy more stocks than they sell," the spokesperson wrote in the email.