Revolut eyes Robinhood in battle over commission-free trading in the US

Rick Steves

Revolut already offers commission-free stock trading on its mobile app to users in the United Kingdom and Europe. 

Revolut

Revolut, the UK-based digital banking app, has launched commission-free stock trading in the United States in a major milestone for the firm which will now compete with leading online brokerage such as Robinhood Markets Inc and Charles Schwab Corp, which has recently acquired E*TRADE.

The so-called “superapp” had to keep making moves within the multi asset space in order to consolidate its position as a market leader. Having launched as a payments services provider, the firm added cryptocurrency trading and savings accounts. Now, it is time for stock trading to address growing demand.

Revolut goes PFOF as it competes with Robinhood

Retail trading has surged particularly since the pandemic and the ‘meme stocks’ phenomenon, with social trading and gamification of trading having an impact on the behavior of the younger generations.

This has led US retail traders to trade approximately $281 billion worth of stocks in 2021 alone. An astonishing figure when compared to $38 billion in 2019.

Revolut has gone the PFOF way, relying on payment for order flow to earn revenue, while traders get access to trading with zero commission. This practice has led to much controversy in the wake of the Gamestop short squeeze as Robinhood, another player using the PFOF model, restricted trades during extreme volatility. Robinhood was accused of conflict of interest.

The SEC reviewed the matter and found no fault, according to a recent report from the regulatory authority. Citadel Securities, Robinhood’s partner, and also a defendant in the short squeeze lawsuit quoted the SEC report in order to dismiss the case. The lawsuit is going in favor of the defendants.

“This to us was just the next logical step”, said Gabe Vallejo, Head of Wealth and Trading at Revolut US, who said the firm is not concerned about an ongoing SEC review of PFOF and a potential ban on the practice. “We’re confident we can continue to offer this product to our customers in the most efficient manner possible”.

The US operation of Revolut offers access to zero commission trading on both full and fractional shares and of more than 1,100 securities and ETFs listed on the New York Stock Exchange and Nasdaq. The fintech secured a U.S. broker-dealer license in September 2021.

Revolut already offers commission-free stock trading on its mobile app to users in the United Kingdom and Europe.

 

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