FinTech and Crypto Startup Robinhood Preparing for an IPO

Siamak Masnavi

On Thursday (6 September 2018), Baiju Prafulkumar Bhatt, the co-founder and co-CEO of Robinhood, the FinTech startup that launched a zero-commission crypto trading service ("Robinhood Crypto") in February, said (during an interview at the TechCrunch Disrupt SF 2018 event in San Francisco) that his firm is preparing for an Initial Public Offering (IPO).

The Californian company, which was founded in 2013 by two former Stanford University students, Baiju Bhatt and Vlad Tenev, was named by LinkedIn on Thursday as the sixth best startup in the U.S.  According to CNBC, "investors in its latest $363 million fundraising round included Sequoia, Google's venture capital fund Capital G, DST Global and Iconiq, boosting its valuation to $5.6 billion"; in total, Robinhood has raised $539 million.

Robinhood lets customers in the U.S. to trade commission-free stocks, options, ETFs, and crypto. It makes money in three ways:

  • Earning interest on funds held in customer accounts.
  • Selling order flow to exchanges wanting additional liquidity.
  • Selling subscriptions to "Robinhood Gold", which costs $10 - $200 per month, and allows margin trading.

Bhatt says that Robinhood's over five million customers use Robinhood's website and/or mobile app ten times a day, and that over the past few years, Robinhood has transacted over $150 billion through its platform, saving its customers over a billion dollars in trading commissions.

When asked if Robinhood was planning to go public, Bhatt replied:

"Absolutely. It's something that we are thinking about in the medium to long term, and actually to that point, one thing that we're excited to mention in this is that we're actively looking for a CFO right now. It's something that we think is very much in the future for Robinhood. Being a public company aligns very closely with our mission as well, and is definitely on the horizon."

He added Robinhood is undergoing constant audits from FINRA, the U.S. SEC, and its security team to make sure that it is doing everything correctly:

"As a financial institution that is regulated by FINRA, the SEC, regular dialog with the Treasury, every financial regulator in the U.S., you name it, we work with them pretty closely... Has really given our business a really strong sort of audit and financial governance set of requirements to meet well before being a public company, and so our fiancials are audited every year, our security practices are audited every year..."

With regard to their crypto trading service, Bhatt was told that when it launched in February 2018, Ether (ETH) was trading around $849, and now (on September 6th, when the interview was taking place) it was at $286, and asked if he felt any "moral pangs or sense of regret about opening crypto to mainstream investors". Bhatt answered:

"So, on the topic of price, looking at the price of cryptocurrencies, very candidly, [it] is not something I do on a day to day basis. We opened up Robinhood Crypto to customers in the U.S. because we thought that this was a big change that is coming to the financial system, and we wanted to make sure that if this was something customers were going to do, that yesterday's business model didn't follow tomorrow's financial system... And whether the price goes up or down, we still believe that this is something that is going to matter long term. So, we feel strong about our offering here."

Last month, as covered by CryptoGlobe, Robinhood announced that it was adding support for trading Etherium Classic (ETC) to Robinhood Crypto, meaning that customers could now invest commission-free in Bitcoin, Ethereum, Bitcoin Cash, Litecoin, Dogecoin, and Ethereum Classic.

Featured Image Credit: Photo by TechCrunch via Flickr; licensed under "CC BY 2.0"

Sub-accounts in Crypto: What They Are and How They Work

 

Julia Gerstein, a crypto trading bots enthusiast and a content writer at TradeSanta. My final goal is to help readers find what they need, understand what they find, and use what they understand appropriately.


Speaking generally, a sub-account is a segregated smaller account that is tied to a larger primary account. Sub-accounts may serve different functions depending on the objectives of their owners. The term can refer to multiple email addresses linked to one user or secondary accounts tied to a primary account with a financial institution or a bank.

For this article, we will be looking at sub-accounts as they exist in the crypto industry, and specifically on trading platforms.

Built-in Sub-Accounts

On trading platforms, the sub-accounts feature allows users to create a set of subsidiary accounts with different trading strategies, funds and end customers. On some platforms, general accounts already come with built-in sub-accounts.

For example, exchange platform Crypto Facilities provides each user with cash and margin accounts when they sign up. While deposits and withdrawals are completed with the cash account, trading an instrument requires users to make an internal transfer from a cash account to their margin account that corresponds to the instrument in question.

Each instrument has its own margin account. This grants users more control over their funds and allows them to manage risks for each instrument separately from their main balance.

Optional Sub-Accounts

Other cryptocurrency exchanges, such as Gemini and Binance, have launched sub-accounts as an optional feature for institutional investors.

As an optional feature, sub-accounts can serve to introduce additional security measures and different access levels between the main account and its subsidiaries. Binance has underlined the differences between a master account and its subsidiaries, providing the former with the exclusive ability to view all data and balances, transfer funds between accounts, and have full managerial control and access to a range of asset audit tools.

Here master accounts have sole control over the movement of assets between sub-accounts, and can grant each of them different access levels and permissions. This ensures that the main account has the power to direct and monitor the actions of all its associated accounts, while each sub-account can perform its function independently from other sub-accounts.

Not Only for Institutional Investors

While institutional investors have been able to create sub-accounts for a while, this feature is still being introduced by more and more major exchanges.

Now even individual investors can create subsidiary accounts to try and assess the performance of distinct trading strategies. For example, HitBTC recently introduced its own sub-accounts feature that is now available per user’s request.

At HitBTC, sub-accounts enable users to create separate subsidiary accounts with which they can utilize various trading styles and strategies with operational autonomy. While each sub-account is separate, all of them are still tied to a master account and contribute to the cumulative volume of all accounts connected to the master.

Because trading volume is measured cumulatively, the use of the subaccounts feature can open up additional benefits for traders such as lower commissions due to progressive fee tiers that reward users for contributing to the liquidity on the trading platform.

Therefore, users can perform a variety of different trading activities unconnected to each other, and all the activities will still weigh in the financial favor of the parties involved. Master accounts also have access to important data such as the performance of each sub-account and total trading fees of all linked accounts combined. While the feature is designed with institutional and corporate clients in mind, on HitBTC any user can create sub-accounts upon request.

The adoption of this feature by more and more trading platforms will be beneficial for both institutional and individual traders. Some users can utilize it to execute different trading strategies or try various algorithms with a clear picture of their effectiveness, others to manage their team and analyze the performance of each account securely and conveniently.

Featured image by Tyler Franta on Unsplash