Hi, good morning, everyone. Thank you for joining us this year at J.P. Morgan's TMC conference. In this fireside chat, we have Steve Quirk, Chief Brokerage Officer at Robinhood. Robinhood is a $70 billion brokerage firm that offers, I got a long list here, retail investors access to stocks, derivatives, crypto, and events contract trading, as well as services including retirement, lending, credit cards, advice, and banking. Steve has served as Chief Brokerage Officer at Robinhood since early 2022. He previously oversaw strategy and development and many of the initiatives for trading at TD Ameritrade and thinkorswim. I've got to say, I think you're probably one of the best acquisitions that Robinhood has ever made. Thank you, thank you
Well, that's very, very nice of you to say.
Thank you so much for joining here today.
Thank you.
for our third TMC conference appearance. I wanted to start off by maybe starting high level market environment. The core retail business, how do you judge the health and the behavior of the client retail investor, not just from a sentiment perspective, but risk capacity, staying power, and how has the volatility in the most recent environment sort of impacted your thoughts about the narrative of the health of the retail investor these days?
It's a good question. It's a question we get a lot from the media because when they picture pure do-it-yourself retail, they kind of look to us at Robinhood. We have 27 million, 27 and a half million customers. Half of them are new to brokerage, so they're younger than many of our competitors. The question really, the question behind the question when they ask us the question is, you know, they probably haven't navigated a lot of the things that people who are older have navigated, how are they faring? The answer to the question is, they're very engaged, very sophisticated because, you know, if you think about the technologies, the avenues to education and information that are available today compared to when I started in the business, they're just far superior.
You know, they can become very sophisticated very quickly. They also have a risk tolerance. This is going to sound like a strange thing to say, when you're in your early 30s, you probably have at least 30 years of investing left, your posture should be more aggressive than somebody I came from Schwab, TD Ameritrade. Their average customer is around 60. You can't afford to be as aggressive at that point in your investing career as you can be when you're in your 30s. They're aggressive in their dip buying. It's been beneficial, you know, for the events that they've been around for. If you think of COVID, you know, there's a lot of talk that retail kind of saved the market in many sectors. Same thing around the tariffs. Our customers were quite aggressive. We saw it across deposits.
Deposits got really heavy. People were opportunistic. Buying in all asset classes was quite heavy, and they were rewarded as a result of it. Now, does that mean they're gonna be rewarded every single time there is a dip? No, but we've seen some buying be tempered in some situations, so, you know, it's not like frenzied activity. You know, it can be measured at times. Overall, looking at the health, and we measure it a couple ways. We have an index that's called the RIX we created because there is a narrative that some in the industry love to perpetuate, which is retail customers buy at the top and sell at the bottom.
You know, we can tell them till we're blue in the face that that's not the case, but the easiest way to dispel it is to show them the data. That's what we do. The index takes the top stocks, the top-held stocks across all of our customers, 27 million, as a percentage of your portfolio. It's very democratic. In other words, you know, if you have a $1,000 portfolio or a $10 million portfolio, we measure you the same. Then we look at that and overlay it on the indices. In the last two of the three years, you know, our customers are outperforming the indices, which is fantastic to see. I think it's great for all of us to see the health of a good retail customer.
Good. I want to get into a little bit about the products that you're offering. You've highlighted products like index options, futures, shorting, margin, as part of the approach to pursuing the active trader toolkit. When you look across the stack, where do you see Robinhood as having the right to win versus someone like a Schwab or an IBKR-style platform, and where do you think you're still playing catch-up?
I think Robinhood, we're kind of in a unique position. When I competed with Robinhood, I marveled at Robinhood's ability to attract the next generation of investors. You know, we were all very candidly, all of us legacy, quote-unquote, legacy brokers were saying we need to figure out how they crack the code in getting, you know, this many customers in the door in four or five years, and it took us six decades to get this number of customers. At the same time, we also knew that Robinhood at the time didn't have a complete offering, so there was a graduation risk, right? It's kind of we're racing, each racing.
That's what made it really exciting to come to Robinhood was because you get the opportunity to sort of reimagine building everything with a blank canvas for people as they move up in terms of sophistication and in terms of the amount of wealth and what they're looking for. That's been really fun to do. As much as there's differences with the way that people invest, example, you know, when I started, there was nobody starting in crypto and moving into equities and other things and ETFs. Like, today, super common. You know, event contracts, sure. I get into event contracts, I learn what else you do in the market. Those avenues didn't exist in the past.
Also just the technology, you know, the technological advances, the idea that 90-some% of that is being done on a phone and being done around the clock is really quite cool. What we've been focused on is just filling out the offering. A lot of the things that you just named were some of the most frequently asked for products, whether it's index options or futures. You know, all these asset classes are account types that are necessary for people to be able to participate fully. Because they're sort of graduating up the curve in terms of their level of sophistication. Even retirement accounts. We didn't have retirement accounts until a couple years ago, and now it's become, you know, quite large, but there's still so much more to do here.
You're having product launches, it feels like every three or four months, and one of the latest ones that you invited us to was Take Flight back in March. One of the products or services you announced was Portfolio Overview, and that links the Robinhood account view with external accounts. It seems to me like it presents a pretty compelling cross-sell opportunity. Provide us with an update on the offering, and in particular, we understand that Robinhood is going aggressively after what I'll call the Achilles heel of the traditional banks and the brokers that offer a low yield on customer cash.
You've got a pretty compelling cash offering. You know, talk about how you're leveraging things like Portfolio Overview to go after new customers at your legacy competitors.
At the core of, I mean, the core of Robinhood's success has been in the self-directed, do it yourself portion of the market. Now we're the number one player across two asset classes. We'll be the number one player in the next couple of years. What we've heard loud and clear from our customers is, as they sort of move up in terms of level of sophistication, number of assets, account types, we need to continue to expand our offering and even give them some help in their investing. They might not feel comfortable investing the amount of money that they're now starting to earn completely self-directed, so they may need help. The avenue to doing that was to build out the products. We have something called Strategy, which manages portfolios for them.
Deliver cash sweep, which we have a very powerful cash sweep, which pays a very competitive rate. Deliver a complete wealth management solution, which we're a month away from rolling out a referral network on. In order to capitalize on that, it's helpful for customers to share with us where their other assets lie. We can point out to them where we have superior offerings, either in terms of pricing or capabilities, and that they would be advantaged to move those over. We're in the early stages of it, and we're still rolling out the capabilities like the referral program. When you pull all those things together, you can see that it becomes quite powerful. The opportunity for us is quite large.
You know, it's 2.5 x the size of addressable assets in the wealth management side as on the self-directed side. We haven't really touched that yet. I would argue, you know, not to be judgmental, but I don't think there's been the advances on the wealth management side that there have been on the self-directed side, both from a product or a technology standpoint, and I think, that's where we excel.
Is the Achilles heel really the yield on cash that you're getting at firms like Chase and Schwab and others?
Well, the reason why it's the Achilles heel is we have $345 billion in assets, and they have trillions. There's a lot to attack there. There's a moat and, you know, if you've been on the inside of the moat, you kind of know where to go.
Talk to me a little bit about international expansion. You've been in the U.K. and the E.U. for about three years. Maybe how are these markets different than what we see in the U.S.? Separately, you acquired an Indonesia brokerage and recently announced approval in Singapore. Talk to us about, you know, Europe versus Asia.
Sure. Our first foray is a little over a year ago in the U.K., outside of the U.S. You know, having been involved in international businesses before when we were having conversations with Vlad and the executive team, there's been, you know, if you go anywhere on the globe, there's a Robinhood of whatever country, whatever region. You know, we said we should be the original. I mean, that's what they're really looking for, a replication of Robinhood in the U.S. You know, we put our flag down in the U.K. and then eventually went to Singapore where we have principal approval and then bought a firm in Indonesia. What makes Indonesia so interesting is the population. You know, it's the fourth largest population and it's very young.
Very young and very progressive, and they're sort of on the upswing and they have, I think, 22 million registered, they have to register, crypto investors, and I don't know what the number is on the traditional brokerage, but it's quite large. There aren't a lot of competitors there because, you know, it's too much in its infancy. We excel in there, in places like that because we're technology first, and we can do things in a super efficient manner and deliver content and education to them so that they can do things in a suitable manner. I think overall, the thought process with international is, look, retail is a complete force in the U.S. You know, we're at 60% of U.S. households now participating.
That's the envy of the world, no matter where you go, Europe, Asia, anywhere. You know, they're in the teens or lower with U.S. households participating. I think it's gonna take time because in order to get that movement going, you have to start, and education and awareness will open doors, and we're really good at doing that, at removing the friction and opening the doors for people to be able to get into markets and understand, you know, the power of being able to invest in markets. I think what I'm most enthused about, both here and abroad, is just what's happening with retail overall. If you look at retail percentages of equities, of options, of crypto, of even IPOs, all across the board, the participation continues to grow.
I know there are a lot of people that assume that this was a COVID thing or something that was gonna be episodic. Never believed it, 'cause it, for as long as I've been in this business, which is a long time, it's been growing. It just has had some accelerations due to events. That, to me, is the most interesting part of this because as much as it's growing like this here, that's gonna happen abroad. It might take a little longer, but we're gonna see a global marketplace and participation across the globe is gonna be really strong.
Let's move to predictive markets, Rothera. Robinhood's JV with Susquehanna is expected to launch imminently. Can you walk us through why the vertically integrated tech stack is better for Robinhood's customers trading predictive markets rather than Robinhood's previous brokered approach with ForecastEx and Kalshi? Is this really about economics and better monetizing the customer base, or is there an element of control and being able to move faster and more flexibly than you would otherwise?
Maybe I'll give you the history of how, you know, we entered the space. We were actually building futures trading, coincidentally when election contracts became permissible. We started with the presidential election, at the time, we were going through ForecastEx, which is Interactive Brokers' prediction market exchange. We saw the interest. You know, I think we had half or 600 million contracts and 800,000 accounts opened. It's tremendous interest. That started to expand, we started partnership with Kalshi as well. We never like to be beholden to one exchange. It's not a comfortable position to be in, we like flexibility.
What we came to realize is, we are the dominant distribution platform for event contracts, and we were also partnering with the dominant market maker there, which is Susquehanna. By coming together and creating our own exchange, it gives us the freedom to drive product development, to drive who liquidity providers are, and to drive the economics and the experience for our customers, which is going to be beneficial across the entire spectrum. I think the other part that is really opportunistic is we're creating an ecosystem with the largest players, we're gonna attract even our competitors there, because that's gonna be an ecosystem where they're gonna have, you know, superior experience across the board.
Maybe moving to the super app. Robinhood talks about its ambitions to be the financial super app. How does this concept of the super app UX goal impact your approach to product development and entry into new markets? Ultimately, at the end of the day, does being the super app mean that you need just one app across all of the services, or can you do it?
The super app and you can have different, you know, icons on something like your cell phone?
We spend so much time on this just because, think about it, there's a tremendous value. I'm guilty of this myself. I would like to have as much of my financial universe in one place as possible. I don't want multiple apps if I can avoid it. There are constraints, right? I need capabilities and I think the technological advances that are happening so fast and we are on the cutting edge of are promising us. I use this cliché all the time. Like, if you would've told me 10 years ago in my career that the largest option trading retail firm on the globe would be doing 99% of their trading on a mobile phone, I would've said, You're crazy. Can't happen. It's happening today.
I don't think the advantage of having everything in one place is solvable and, you know, Robinhood, we really excel at design. That's one of the things that we're regularly lauded for. I think we can do it all in one place. The value of that is I can be in one place and do my banking, my credit card, I can do my, you know, my crypto investing, equity investing, even my retirement and everything in one uniform place and see it all in aggregate.
Okay. At the end of this, fireside, I am gonna open up to Q&A, probably in 10-ish minutes. If you have questions, or don't have questions, think about them.
Okay.
We'll send a mic around. Maybe moving to regulation. The SEC just removed the $25,000 pattern day trading minimum for small accounts. How big a deal is this for Robinhood?
It's a really big deal, and we've spent a lot of time lobbying both FINRA and the SEC on this because Robinhood's customers were impacted in a way that other brokerage firms weren't. The average account size is much smaller at Robinhood. This rule is one that materially impacts accounts that are under 25,000. It's very confusing for customers. The rule was put in place with a good reason, you know, around 2000 when the day trading boom, because the risk management systems of both brokerages and clearing firms couldn't keep pace with the trading activity that was happening. The rule was put in place to protect customers.
What is the rule?
Well, the simplest version is, you know, four trades in five days, which, you know, a lot of customers when we're explaining it, they just think they get a scarlet letter. They don't even know why, they, you know, their only move to get out of this thing is to basically go to another broker. They ACAT out and go to another broker and start fresh. We know where all those people went, which is helpful. That rule is being amended and I think the date is June 1st, which is the implementation date.
All the people that have been impacted by that, and picture yourself, you're basically stuck in a position where you know if you make one more trade, you're going to be flagged and materially impacted from doing anything, so you're sitting in a position that you don't want to sit in. I, you know, I commend the regulators for understanding that this rule was well past its useful time. We're now in a position where that rule is going to be gone and, you know, we have an opportunity to talk to all the people that loved Robinhood but couldn't be here because of this rule.
If you think about the impact of that, you know, many of our competitors' accounts are much larger, so the impact to their client base was much smaller than the impact to ours.
Yeah. The average account size at Robinhood is-
13
thousand?
Yep.
Okay. This would have 2 impacts. One is a trading activity impact.
The other is a customer retention impact.
Reattraction impact.
reattraction impact.
Yeah.
Okay.
We do ask people why they ACAT, and I mean, we do get responses from many of them.
Yep. The, the conclusion is pretty big deal for Robinhood?
Yeah. Chris will kill me if I tell you how big of a deal, but it's going to be very positive.
Okay.
It will be a very positive development.
As we think about wrapping up, if we fast-forward five years, what's your bet on what retail brokerage means for investors at Robinhood? Is it still mostly trading in five years? Is it more about banking? Is it about social engagement, portfolio construction, advice, cash management?
directions or maybe go in all directions at the same time. You know, what is, what do things look like for Robinhood if we go out to the investable limits for us here today?
I think the thing that connects all of the items that you just talked about is technology. Like, it has an ability to connect all these things in a way that is so unique and makes it even more frictionless for customers to be able to move from one asset class, one timeframe, one account type, one, you know, advisory service, whether that's partially automated or in human hands, back and forth.
I think the expansion of that, the collision of technologies like tokenized securities, round-the-clock trading, which is already here, but now it's gonna be on weekends for other asset classes, and then the global aspect of it is gonna make this. This is where the super app really comes into play. Being able to accommodate all those needs in one place and with a frictionless experience on a phone, if desired, 24/7 is amazing. You know, I mean, if you look at the news that's driving the markets today, it's not happening during the average trading day. It's happening on weekends or in the after-hours. Some of our biggest nights, we have 24/5 trading for equities.
Our biggest nights are Sunday nights, 'cause you build up a bunch of demand over the weekend with all the news that's happening. We see really strong volumes at 8:00 P.M. when the market opens.
You sit in the intersection of product, market structure, and regulation. What are the two or three decisions that you'll have to get right as you prepare the business for the next five years?
I think it's, you know, we have a really, really, really strong legal and government affairs team. A lot of them are ex-regulators and so we have a really strong relationship with elected officials and regulators. That's really important because it's even more important today because of how quickly things are moving. Think of AI and the use of AI and how it's being used in, even in brokerage and in financial services. We're uniquely positioned to help them understand, you know, we're a scale player on the crypto side, we're a scale player on traditional brokerage, we're a scale technology firm, and we're also global.
We have a unique perch to be able to help them understand where this market's going really quickly and what they need to do to make sure that they navigate it in a way that's gonna be beneficial for customers and that there isn't gonna be customer harm. I think the opportunistic self of me says, this is a really cool time to be able to influence where this market's gonna go with things like tokenization, with things like, you know, all the things that are being discussed. Collaboration between the CFTC and the SEC with respect to event contracts that could be securities. We're regulated by both, and we understand well what these products look like. Do we have a preference where they get regulated? Sure.
Ultimately, do we care? No. No, we're not on one side of the fence. This is what makes us unique. We're not a CFTC-only shop. We're not a SEC-only shop. We're regulated in crypto, you know, we can be helpful as they think through these. These are kinda sticky problems for them.
Robinhood is, a , if not the market leader in your core business of options and equities. You're diversifying asset classes, you're entering new geographies, in the scope of a competitive market that's broadening, particularly as regulation emerges and welcomes new players. You know, how do you see the competitive landscape shifting as the regulatory landscape evolves?
Uh, I think it-
Is it different in the U.S. versus outside the U.S.?
Well, the one thing that I would say that's been very welcome is an acknowledgment that if we don't get it right, things will just move overseas, which they did during crypto, you know, during the last administration in crypto. Basically, everybody just went overseas with everything that they were doing. We were kind of, you know, we were kinda hamstrung for a period of time because, you know, we're heavily regulated, and we wanna make sure that we're not, you know, we're not trying to circumvent regulation. We were actually asking for it. I think what we have to be careful about, and I'm talking about globally, is regulatory arbitrage and making sure. Look, if you look at the destinations we picked as our first destinations overseas, they're the strongest regulatory regimes in the world.
The U.K., Singapore, these are strong regulatory regimes. That's by design. Like, we are telling the world that we're not trying to circumvent regulation. We'll embrace regulation. We just want clear regulation because it's hard to navigate a world where there isn't clear regulation. We just try and help them with the framework of that. I think there's gonna be some really cool opportunities across asset classes and across technologies that we can be at the forefront of.
Okay. Let's call it there. If there's any questions, raise your hand, and we'll bring around a mic. Just introduce yourself.
Hi, I'm Nick Sertl with ThornTree Capital Partners. Back on prediction markets, maybe just looking at, you know, sports betting operators have always had a lot of churn. How, as you invest in this category, do you think about churn and how that impacts, like, the entirety of the business?
Well, first of all, I think, and I know there's been a lot of conversations about it, and it hasn't happened yet, at least on, if you look at, like, Kalshi Volume or others. The way we picture these event contracts is. We're in the very early innings of all the categories where we're gonna see these contracts, and sports is one category. I think you're gonna see an expansion of categories across things that look closer to securities, which is our core business. That's one of the reasons why we're standing up Rothera, 'cause we wanna have control over how this is, how we navigate the landscape and roll out the products.
With respect to the question on the churn, you know, we look at that, and we haven't seen meaningful churn. The question we often get asked is who's using these? You know, who is using this? Is this your core customer? Is this somebody who's only using these? Is this somebody who's a crypto enthusiast as well? It actually spans. It's completely different across different segments. Election contracts are different than weather are different than economic indicators are different than sports. It tends to resurrect people, and then they'll come into the other asset classes as well.
Great. Any other questions? Okay, I'm going to sneak one more in. There's a number of highly anticipated mega IPOs that are expected later this year, so SpaceX, OpenAI, Anthropic, et cetera. What do these deals mean for Robinhood? How do you participate? How do you allow your customers to participate, and what does their participation ultimately mean, you know, for the P&L?
The way that we let them participate directly is a product that we have called IPO Access. The history of IPO Access, 'cause it's been around for a while, this is kind of goes back to my earlier comment about the rise of retail. I think we're 40 some IPOs that we've done, we participated in and given customers access when they've expressed interest. We used to scratch and kick to get 1% or 2% of the allocation and be happy with it. Today, we have companies that are coming to us and saying, I think we were 20% of [Bullish]. They came to us and said, retail is an important component here. Our customers tend to hold.
I think my number is, don't quote me, I think it's like 60% or 70% after two months are still holding. They're fans of these companies. They're not flipping these IPOs. I think that resonates with these companies as they come out. We also show them what our demand is when they give us an allocation, and in many instances, we could have taken the whole thing. Our customers could take the whole thing. There's strong interest there, and it's something that I think resonates with the issuing companies and the underwriters. The other thing I'd say is it also builds into our entire ecosystem of securities lending and everything else because these often become hot names on the securities lending side, and now we have all kinds of inventory.
It's, you know, it's kind of a nice flywheel for our business and for our customers.
Okay, great. We have a couple seconds for a quickie question if there's one. Otherwise, we'll wrap there. Last chance. Okay.
Thank you.
Thank you very much.