CashNews.co
Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Robinhood is set to launch margin trading in the UK in the coming weeks, opening the door for individual investors to engage in the leveraged stock bets that have helped propel frenzied bouts of US retail trading.
The move comes ahead of a big UK marketing push for the group, which is also considering launching long-term savings products as it seeks to position itself as a mainstream investment platform for younger investors.
Vlad Tenev, co-founder and chief executive of Robinhood, told the Financial Times that margin trading was “launching in the next couple of weeks” and that the company was also “looking to offer Isas and Sipps”, as it seeks to entice British customers to use the platform and widen its appeal from day trading.
According to Tenev, the UK’s relative lack of a retail investment culture is an opportunity for the company, which wants to persuade clients to trade stocks more actively.
“The UK hasn’t really fundamentally shifted as the US market has,” he said. “There hasn’t been a gigantic increase in investing among households.”
Robinhood launched its first overseas broking unit in the UK last year, seeking to grab business from larger retail brokerages, which it says typically charge higher fees on trades, and as it diversifies beyond meme stocks. Robinhood held back margin trading from the March opening of its UK brokerage business as it talked to regulators. The Financial Conduct Authority declined to comment.
Margin trading allows investors to borrow money to amplify their gains and losses, and is highly risky. Thousands of retail traders used leverage during the pandemic-era meme stock mania, in which Robinhood’s app played a central role.
The company was fined more than $70mn in 2021 by a Wall Street regulator, for issues that included providing misleading information on margin trading.
Founded in 2013, Robinhood shook up the US retail investment market by offering commission-free trading and helping to introduce a new generation of retail investors to speculation through stock bets, including through options.
It was later thrust into the spotlight during the coronavirus pandemic when retail investors using Robinhood and other platforms flocked to trade meme stocks such as GameStop, feeding a share price surge that then crashed. The California-based company launched its UK brokerage last year, giving British customers access to trade more than 6,000 US stocks.
Robinhood is also looking to push deeper into crypto markets and bought European exchange Bitstamp for $200mn in June. Tenev said that Europe, which was “far behind” the US when it came to artificial intelligence regulation, was ahead in terms of allowing the use of digital technologies, such as tokenisation of securities using blockchains, in trading.
“The European regulators are more accepting of financial innovation, and part of that is that they want to be seen as competitive,” he said. “They want more market share compared to the US.”
Tenev suggested tokenised equity trading — where traditional stocks are converted into digital tokens that can be traded 24 hours a day and ported from one platform to another — could be adopted in Europe first. “Fintech platforms are looking at this very closely . . . we’d like to be at the forefront on that,” he said.