Robinhood Expands Canadian Footprint with Toronto-Based Hiring Push
It seems Robinhood is gathering a merry band of engineers somewhere in Hogtown. Robinhood Canada is on a hiring spree in Toronto. Just shoring up engineering talent with a satellite crew of Canucks? Possibly. But given the overhead that goes with registering and hiring in a new country, it makes us wonder when we’ll see the Robinhood stock trading platform available for Canadians.
The Menlo Park, California-based parent company has office locations in several US cities, but just four outside of the US: Lithuania, London, Netherlands, and Canada. The Canada location is the only one with open hires, and there’s plenty: a quick scan shows 23 open roles in engineering and security.
Will Robinhood disrupt Canada’s online broker market?
It’s no surprise that online brokerages with existing platforms are eyeing the Canadian market. We’ve already seen the growth curve of Wealthsimple. The company’s assets have risen nearly 10-fold to $25 billion since 2018. CEO Michael Katchen recently told investors “We’re adding about $1 billion dollars of net deposits a month right now.” The company has set a target of quadrupling assets to $100 billion in five years.
It’s been just a few months since Webull Canada obtained its authorization and rolled out new brokerage services allowing Canadian users to trade both Canadian- and US-listed equities through the Webull app. Webull, owned by Chinese holding company Hunan Fumi Information Technology, is a very popular trading platform in the 180 countries it serves, with over 10 million downloads from the Google Play store. Referring to the company’s launch in Canada, Anthony Denier, Group President of Webull, commented, “Webull sees a huge opportunity to disrupt a traditionally expensive brokerage system in Canada.”
Robinhood’s recent expansion into Europe may be an indicator that the Canadian market is next.
Canadians’ Adoption of Digital Trading Platforms
A report by ISS Insights found that for the year ending June 30, 2022, firms offering zero-commission trading generated 46% of all new accounts opened, as well as 30% of all trades in the industry. The report also found that 54% of client accounts at firms with zero-commission trading are held by investors under 35 years of age.
There are still many investors who prefer to work with advisors or brokers rather than directly trading through a digital platform, or who simply don’t invest at all. We asked nearly 2,000 Canadians the question “Do you buy stocks, mutual funds, or ETFs yourself through a web/mobile platform?”. Just 20.5% said “Yes”.
The Birth of Robinhood
In 2013, the financial landscape first saw a revolutionary platform aimed at democratizing access to the stock market: Robinhood. Founded by Vlad Tenev and Baiju Bhatt, Robinhood was conceived out of a desire to make financial markets more accessible to the average person, not just the wealthy or experienced traders. With its headquarters in Menlo Park, California, Robinhood introduced a user-friendly mobile app that eliminated commission fees for stock trades, a disruptive model that challenged traditional brokerage firms and appealed to a younger, tech-savvy generation.
The Rise of Robinhood
Robinhood’s rise to prominence can be attributed to its straightforward, intuitive platform and the appeal of commission-free trades. This innovation not only attracted millions of users but also prompted a shift in the brokerage industry, with several established firms eventually reducing or eliminating their trading fees to remain competitive. Robinhood’s appeal was further enhanced by features such as fractional share trading, allowing users to invest in high-value stocks with minimal amounts, and Robinhood Gold, a premium service offering additional trading tools and features.
The platform’s growth was particularly notable during the early months of the COVID-19 pandemic when many individuals, especially millennials and Gen Z, turned to stock trading during lockdowns. This period saw a surge in account openings, as people sought to make the most of market volatility or simply to pass the time with a new hobby.
A Little Trouble With the Authorities
Robinhood has faced scrutiny from regulatory bodies over its duty to protect investors as well as its revenue model, particularly the practice of payment for order flow (PFOF). This involves Robinhood receiving compensation for directing orders to particular market makers, a common but debated practice in the industry.
In December 2020, the Securities and Exchange Commission (SEC) charged Robinhood with misleading customers about revenue sources and failing to provide the best execution of trades, leading to a $65 million settlement without admitting or denying the findings. Furthermore, during the GameStop trading frenzy in early 2021, Robinhood’s decision to restrict trading on certain stocks drew backlash from users and lawmakers alike, sparking debates about market manipulation and the rights of retail investors.
Recent Growth and Expansion
Despite these challenges, Robinhood has continued to grow and expand its offerings. The platform has broadened its product range to include cryptocurrency trading, options, and even a cash management service, appealing to a wider audience seeking a comprehensive financial app. In July 2021, Robinhood went public with an initial public offering (IPO). Robinhood launched online trading and crypto trading to European markets in December, 2023.
