Why Canadians can’t use Robinhood — and the alternatives
Canadians can’t get the buzzed-about trading app, but there are alternatives
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You’ve probably been hearing a lot about an app called Robinhood lately. Millions of independent U.S. investors are using it to play the stock market, mainly because they don’t have to pay for trades.
If that sounds interesting to you, you may be wondering why you can’t set up a Robinhood account in Canada.
The biggest reason is a legal restriction on the use of “market-makers” to complete trades in Canada.
If you’re looking to learn how no-commission trading works for Robinhood — and for the best bets for Canadian DIY investors — then read on.
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Have you ever wondered why investors can always buy or sell stocks anytime they want? It doesn’t work that way with used cars or houses, or even some consumer products (as anyone who’s tried to buy a PlayStation 5 knows all too well).
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One of the big questions raised by the recent “Reddit rally” on trendy stocks like GameStop (GME) was: how did Robinhood make money if it wasn’t charging commission on all those in-app trades?
According to Robinhood, the company “generates income on uninvested cash… primarily by depositing this cash in interest-bearing bank accounts.”
But the other major source of Robinhood’s revenue is that market-makers pay them for the right to execute customer trades. And that can turn into big money when trading is as fast and furious as it’s been in 2021 so far.
Robinhood also charges fees for transferring securities from one account to another, as well as for various services. They also offer a premium subscription service called Robinhood Gold.
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