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Written by Krysten Zinon on February 2, 2023
Category: 
FTC Disclosure

Is Robinhood Really Commission Free In 2023?

Robinhood is a popular brokerage app that allows investors to buy and sell stocks, options, cryptocurrencies, and other securities.

One of the biggest advantages of using Robinhood is that it is commission-free.

However, there are some small regulatory fees that are passed on to customers to cover the costs incurred by the government for supervising and regulating the securities markets and professionals.

1. FINRA Regulatory Transaction Fee

One of these fees is the regulatory transaction fee, which is charged by the Financial Industry Regulatory Authority (FINRA) to help cover the costs of the Securities and Exchange Commission (SEC).

  • As of February 27, 2023, the SEC fee is $8 per $1,000,000 of principal (only for sell orders), rounded up to the nearest penny.
  • Robinhood doesn't pass this fee on to customers for sales with a notional value of $500 or less.

Keep in mind that option orders incur both the passthrough SEC fee and the FINRA trading activity fee (TAF) regardless of the sale order value.

2. FINRA Trading Activity Fee

The FINRA trading activity fee is charged to brokerage firms like Robinhood to cover the costs of supervising and regulating these firms.

  • Robinhood passes this fee on to customers, except for sales of 50 shares or less.
  • As of January 1, 2023, the TAF is $0.000145 per share (equity sells) and $0.00244 per contract (options sells).
  • This fee is rounded up to the nearest penny, which will be no greater than $7.27 per trade.

Keep in mind that you may be charged more than the $7.27 fee because the fee limit is based on the execution of your order, which can occur with multiple trades.

3. ADR Fees (Foreign Stock Ownership)

Lastly, if you are trading American depositary receipts (ADRs), which are certificates that represent foreign stocks that you can trade on U.S. stock markets, the banks issuing these certificates may charge custodial fees that typically range from $0.01-$0.03 per share.

Final Thoughts

In conclusion, while Robinhood is commission-free, there are some small regulatory fees that customers need to be aware of.

As a customer of Robinhood, you can rest assured that you are not paying high commission rates, which can eat into returns.

This article was generated using automation technology, and thoroughly edited and fact-checked by an editor on our editorial staff.

Article written by Krysten Zinon

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