Morning Markets: We’ve tracked the changing face of trading fees amongst online brokers in the Robinhood era for some time now.
Robinhood’s radical pricing forced its larger, public rivals to follow suit.
In effect, Robinhood’s model forced its rivals to slash fees, cutting revenue in the process, leading investors to push their market value down.
As noted, big brokers that Robinhood forced into changing their fee structure were initially repriced.
More simply, the incumbent players in the market are spending their ad budgets showing off new pricing schemes that Robinhood forced them into.
If this advertising moment winds up boosting customer acquisition costs amongst Robinhood and its rivals, while likely depressing short-term top line from those customers (see the opening line of this section), the economics of trading could become less attractive.
Summing, what we’ve seen is a startup (Robinhood) push its rivals (incumbent trading platforms) into matching its competitive advantage (zero-cost trades).
Then, its rivals (publicly-traded, profitable companies) started using Robinhood’s old selling point (low-cost financial services) as a way to attract more customers to their own wares, but with likely larger budgets.