Robinhood Unveils Overnight Trading in Stocks and ETFs, HOOD Shares Rise

LONDON, UK – January 2021: Robinhood investing app under magnifying glass.

Investors will soon be able to buy stocks around the clock on Robinhood’s trading platform. The online brokerage has announced plans to launch 24/5 trading in certain stocks and ETFs. Robinhood’s expanded hours were unveiled on the same day that the company reported mixed quarterly earnings results. HOOD shares rose 5% in after-hours trading.  

Robinhood’s competitive move comes as the industry seeks to meet a growing demand to trade beyond the normal market hours of 9:30 a.m. – 4 p.m. EST. While extended-hours trading is nothing new, the brokerage industry is increasingly moving in the direction of overnight trading. 

For example, trading platform 24 Exchange, backed by billionaire Steve Cohen’s hedge fund, envisions a platform that supports trading 24/7 seven days a week, even on holidays. However, 24 Exchange hit a regulatory snag that has seemingly delayed its launch, giving Robinhood a chance to pounce. 

For its part, Robinhood will support trading between the hours of 8 p.m. on Sunday until 8 p.m. on Friday in over 40 stocks, including Tesla, Apple and Amazon, according to The Wall Street Journal. Robinhood customers will be limited to placing limit orders in the wee hours to prevent riskier trades from going through before the markets open. Robinhood will be going toe-to-toe with the likes of E-Trade, TDAmeritrade, which also support overnight trading in a limited number of ETFs. Robinhood is differentiating itself by also allowing customers to trade stocks overnight. 

The brokerage plans a partial introduction of the expanded trading features in May with a full roll-out expected in June. Robinhood will continue to add to the roster of stocks and ETFs that are supported in expanded-hours trading over time. In addition, reports suggest that Robinhood plans to extend its brokerage footprint into futures trading by the end of this year. 

Investors rewarded HOOD stock in response to the brokerage’s growth plans as well as its latest quarterly earnings results. Robinhood is no doubt looking to recapture some of the excitement that surrounded its stock around its IPO when its stock was trading at its peak of $70 compared to its current level in the single digits. 

Robinhood’s Quarterly Results

Robinhood reported strong top-line results thanks largely to the rising interest rate environment. Revenues soared 47% vs. the year ago quarter to $441 million, topping Wall Street estimates. 

Meanwhile, net interest revenue came in at $208 million, representing an increase of nearly fourfold vs. the year-ago quarter. The catalyst was interest earned from its products and services, including lending. 

Third Bridge analyst Andrew McGee is quoted by Reuters as saying the rising rate environment served as a “significant tailwind” for Robinhood. 

Despite the higher revenues, Robinhood is still operating at a loss. The company reported a Q1 loss of $511 million, or -$0.57 per share vs. a Q4 net loss of $166 million or -$0.19 per share. This served as a point of frustration for some investors considering that the company’s stock-based compensation amounts to approximately $1 billion in 2023. 

In addition, Robinhood had exposure to former crypto market leader Sam Bankman Fried, the ex-FTX boss who was charged with allegedly stealing customer funds. Bankman-Fried purchased shares of HOOD through a subsidiary using borrowed money. Robinhood executives said they are moving closer to buying those shares back. 

The brokerage also suffered a decline in the number of users in the quarter. Its monthly active users fell to under 12 million from nearly 16 million in the year-ago quarter. 

The company saw a 5% decline in transaction revenue, weighed down by lower volumes in cryptocurrency trading. Transaction revenue in options and equities increased. 

Regulatory Scrutiny 

Meanwhile, regulators are targeting Robinhood over whether it properly adhered to compliance rules involving the communication channels that employees use. The brokerage is far from the only financial services firm that has come under fire for similar tactics. 

In 2021, JPMorgan was fined hundreds of millions of dollars for allowing employees to communicate using their personal devices and apps like WeChat. 

Robinhood is being investigated by the U.S. SEC and FINRA and is cooperating with those probes. 

Leave a Reply

Your email address will not be published. Required fields are marked *

Previous Post
Robert F. Kennedy Jr

The Democrat Candidate Kennedy Will Participate At Bitcoin 2023

Next Post

Key Takeaways from April’s Inflation Report: What is Up Next for the Fed

Related Posts