There has been some confusion and misinformation circulating on social media about whether investors who use Robinhood actually own the shares they purchase through the popular trading app.
Some people have claimed that Robinhood does not give you actual ownership of your shares, and that your investments are simply held as collateral by Robinhood.
So, do you actually own your shares on Robinhood? The short answer is yes, you absolutely do.
As soon as your order is executed and your shares are purchased, you own them outright.
This is not unique to Robinhood; it is standard practice across all brokerages. When you buy a stock, you own a piece of the underlying company, and your shares are registered with the Depository Trust & Clearing Corporation (DTCC) and held in your brokerage account. The process of settling your trade, which takes two days, is the same at every brokerage, including Fidelity, TD Ameritrade, and Charles Schwab.
It’s important to note that Robinhood is not engaging in contract for difference (CFD) trading, which is a type of forex trading. Robinhood Securities is a clearing broker dealer, not a market maker, and the company doesn’t sell shares short.
The confusion surrounding Robinhood’s handling of shares may stem from the company’s past issues with its cash management product, which was marketed as a savings account but did not have Federal Deposit Insurance Corporation (FDIC) insurance. However, Robinhood has since removed the product and clarified its policies, and the company is now working on obtaining FDIC insurance for its cash management accounts.
In short, there is no reason to believe that Robinhood is holding your investments as collateral or that you do not actually own the shares you purchase through the platform. You own the shares outright, just like you would at any other brokerage.
This article was generated using automation technology, and thoroughly edited and fact-checked by an editor on our editorial staff.