Robinhood offers users money for deposits

Depending on the size of the deposit, traders of the brokerage platform can receive a bonus from $ 10 to $ 250

Robinhood offers users money for deposits
The photo shows people demanding a refund from Robinhood after the company stopped trading in GameStop shares. The action took place in Menlo Park, California, near the Robinhood headquarters. Source: New-York Times

Robinhood Markets introduced a marketing campaign promising a bonus to some traders for new deposits just as millions of Americans started to collect government incentives of $1,400.

Under Robinhood Cash Rewards, chosen members of the trading platform can receive a bonus of 10 dollars in a $200 deposit and a $250 deposit of 15,000 dollars for the next two weeks. This offer was introduced only a few weeks after the co-founder of Robinhood spoke at the Congress about company characteristics in which critics say customers are forced to trade in an aggressive and risky way.

A Robinhood spokesperson said that the activity was not related to the incentive program of the government. She added that the company frequently makes such deals, but refused to explain how many promotions have been conducted in the past.

After President Joe Biden signed a Dollar 1.9 trillion stimulus bill last week, new incentives to offset the economic effects of the Covid-19 pandemic started to flow to Americans. Many people spend money on basic needs, but some can also afford to save it.

The market expects incentives to increase inventories and cryptocurrencies, and social media are full of messages where checks can be made. The stimulus started last year on equity markets and propelled digital currencies such as Bitcoin to record levels. Robinhood attracted millions of new users to its website at the same time. During quarantine, people mastered new areas of operation and sought a chance to earn money.

"This promotion is not open to the public," says the website of Robinhood. "The bonus is only given to those who got a letter from Robinhood."

Robinhood supports merchants

Only a few weeks ago, the company raised trillions of new capital and has since attracted further publicity. In Feb., Congressmen asked Vlad Tenev, co-founder of Robinhood, about the business model of the company and the role it plays in over 13 million retail investors, many being young and joining the markets for the first time. One of the major problems is that the company's revenues and the volume of trading of its users are increasing.

Just months after the Massachusetts Securities Regulator lodged a complaint accusing Robinhood of exposing users to "unnecessary trade risks," the Congressional hearing was held on 18th February. The lawsuit states that the corporation violates the standard of acting in the best interests of its customers.

In response, Robinhood claimed that the platform does not promote overtrading and that it simply designs a simple, user friendly interface with the user in mind. The business has consistently said that it plays a crucial role in capital markets, helping young traders to invest with various needs.

Tenev noted that Robinhood makes money out of order routing, technology through which a broker sends customer trading orders to financial companies such as Citadel Securities, which then complete orders, paying Robinhood per transaction. This practice is very popular, albeit controversial, in the brokerage industry.

The California-based brokerage firm Menlo Park received around $687 million from such payments last year, according to regulatory documents collected by Bloomberg Intelligence.

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