The Information's TITV
00:02:27 · Akash Pasricha, Shiv Verma
[00:02:27] S0: Tell me about the take rate on these events contracts. [00:02:33] S1: How high is it? Yeah. So one of the things we did is we bought our own exchange, and then we lowered the price that customers pay. So it used to be 2¢ per contract. 1¢ went to us as the FCM, and 1¢ went to the exchange. When we bought our own exchange and vertically integrated, what we did is we said first we're gonna give some of that back to the customer. The second thing we did is we made it dynamic pricing. So if you take a typical contract, let's say it's a 50% probability and you're paying two cents, It was also 2¢ if it was a 5% probability. So customers were complaining, Hey, that's a pretty big take rate on those smaller level probability events. So what we did is we made the pricing dynamic so that if the probability is smaller, you actually pay less and that way customers get a better experience. And so big picture, now that we're vertically integrated, the overall pricing is lower, and also depending on the type of contract, customers pay different types of fees. [00:03:23] S0: And so factoring that in then to your own profitability on events contracts, on crypto trading, and on equities trading, rank those three for me. Which is highest margin for Robinhood? Which is lowest?
00:03:23 · Akash Pasricha, Shiv Verma
[00:03:23] S0: And so factoring that in then to your own profitability on events contracts, on crypto trading, and on equities trading, rank those three for me. Which is highest margin for Robinhood? Which is lowest? [00:03:41] S1: Yeah. Great question. So equities is the most mature business, so that tends to be the smallest. We actually don't charge any commissions. The rebates we get are about 1.2¢ for a $100 traded, so incredibly small. Crypto is dynamic pricing, and so if you trade more, you tend to be really low. You can get as low as five basis points or even less. And then if you're a little bit mature, you're still getting kind of in the 75 basis point range. And so much higher, much better relative to our competitors. Event contract's a little bit different. It's 2¢ per contract on average. However, if you're paying more at the wings, it's a little bit less. And so a good way to think about it is the more mature the business is, probably the lower it's gonna be, and equities and options are the most mature, and then crypto and then the event contracts. [00:04:26] S0: Right. And so I want to ask you about this interesting, I guess, contrast in the results here. So crypto trading was down for the quarter, but you mentioned that event contracts associated with crypto, that grew... So, guess sort of we get into the absolute sizes versus the relative sizes here. But I mean, help me understand this dynamic here. Are crypto traders just going to prediction markets now to bet on more specific things? What does this tell you about investor interest broadly?
00:05:05 · Shiv Verma, Akash Pasricha
[00:05:05] S1: Yeah. Great question. So first, actually, crypto trading was up quarter over quarter. It was down year over year, but sequentially, it was actually up. Yeah. But one of the really interesting things that that we mentioned is that we are seeing people use event contracts to place views on crypto, And that's one of the categories that's growing in addition to, as I mentioned, economics or sports or culture. This is just a different way to express a view. Why do customers like it? You can go directly in there. You can see what the probability is. They can have shorter duration. And so if you think about ways you can express views in crypto, you can do it spot on the actual asset, you can do futures, you can do derivatives, now you can do an event contract. What we typically see is as you add any new asset classes, they all become additive. You don't normally see people rotating or cannibalization, it makes the overall pie bigger, and event contracts are just another way to do that. And so, yeah, we were seeing a lot of interest in the crypto markets, and so we're continuing to build some more contracts in that space on the event contracts platform. [00:06:04] S0: Do you think events contracts becomes a bigger business than crypto inevitably? I don't think it's as big yet. Still... I think it was over 100,000,000, I know you said, so it's a fourteenth business over 100,000,000, but I think crypto is a couple 100,000,000 still, right? [00:06:23] S1: So actually, right now, the run rate for event contracts is larger than crypto. Oh, larger. Okay. Well, there
00:06:23 · Shiv Verma, Umesh Padval, Akash Pasricha
[00:06:23] S1: So actually, right now, the run rate for event contracts is larger than crypto. Oh, larger. Okay. Well, there [00:06:28] S2: you go. [00:06:28] S1: It's crossed the $500,000,000 run rate. Couple things I'll tell you about. On crypto, we are still long term bullish, and what we're focusing our cycles on is the infrastructure layer. And so we announced the Robinhood chain in July, and one thing I shared yesterday is in its first full quarter of operation, did about 50,000,000 of gross revenue. Tremendous, and actually much better than we expected. So the infrastructure layer continues to go really well. On event contracts, we think we're at the beginning of a super cycle. I actually think this could be bigger than The US equities market. And so if you look at a typical event contracts month or quarter, you know, you might do 6 to 10,000,000,000 of event contracts volume. We do 10,000,000,000 of equities volume a day. And so while event contracts is growing, relative to equities, it's much, much smaller. So if we were to come back in five to ten years, I actually think the events contracts has a ton of room to run-in terms of the total size. [00:07:18] S0: So tell me, other than the advantage that you can trade all these assets in one spot, what is the advantage that you are pitching to customers in terms of why they should trade events contracts on Robinhood compared to Polymarket and and Kalshi?
00:07:18 · Akash Pasricha, Shiv Verma
[00:07:18] S0: So tell me, other than the advantage that you can trade all these assets in one spot, what is the advantage that you are pitching to customers in terms of why they should trade events contracts on Robinhood compared to Polymarket and and Kalshi? [00:07:37] S1: Yeah. Great. Great question. So a couple different things. One, you mentioned, you can do all your asset classes together. That is a really powerful point for active traders in particular. Two, with our new dynamic pricing, we believe we have the best pricing out there. And so that's really great for customers. The third thing we're bullish on, it relates to the first one, is we are now building event contracts for the equities types market. So for example, we announced KPI options at our Hood Summit a few weeks ago. You can now go in and place an event contract in the very near term on say Apple for example. But you can say the number of iPhones it's gonna ship, how many Duos it's gonna ship, what are revenue, what are EPS. That is something our competitors can't do because it will be a brokerage product. And if you're an active trader and you wanna be able to go between equities or options or crypto or event contracts, Robinhood is gonna be the destination to do it. And so the way we see it is it's making the entire platform better, whether your equities options crypto, and it's a unique advantage that we have relative to many of our peers.
00:07:37 · Shiv Verma, Akash Pasricha
[00:07:37] S1: Yeah. Great. Great question. So a couple different things. One, you mentioned, you can do all your asset classes together. That is a really powerful point for active traders in particular. Two, with our new dynamic pricing, we believe we have the best pricing out there. And so that's really great for customers. The third thing we're bullish on, it relates to the first one, is we are now building event contracts for the equities types market. So for example, we announced KPI options at our Hood Summit a few weeks ago. You can now go in and place an event contract in the very near term on say Apple for example. But you can say the number of iPhones it's gonna ship, how many Duos it's gonna ship, what are revenue, what are EPS. That is something our competitors can't do because it will be a brokerage product. And if you're an active trader and you wanna be able to go between equities or options or crypto or event contracts, Robinhood is gonna be the destination to do it. And so the way we see it is it's making the entire platform better, whether your equities options crypto, and it's a unique advantage that we have relative to many of our peers. [00:08:33] S0: Right. So, okay, we talked about crypto, we talked about prediction markets, so now we have to talk about AI just to complete the trifecta. So remind us now, what agents can you use to trade on Robinhood? What can't you do? What is the suite of what's available?