Speaker 1: We are joined by Robinhood co founder and CEO Vlad Tenev,
Speaker 1: and fascinating Vlad. Want to talk to you actually about
Speaker 1: the quarter in just a minute, but I would actually
Speaker 1: love to talk to you about what happened after the quarter,
Speaker 1: because you saw August hit and all of a sudden,
Speaker 1: a manic Monday, and a lot of questions out there
Speaker 1: about how the retail trader in particular has behaved, what
Speaker 1: do your volumes look like for August and in Monday
Speaker 1: in particular.
Speaker 2: Thanks for having me, Shanali and Matt. August has been
Speaker 2: very strong. We shared in the earnings call that July
Speaker 2: volumes were about twenty percent higher than what we reported
Speaker 2: across June. August has continued very much the same one
Speaker 2: billion in net deposits in the first week, about half
Speaker 2: a billion of that came this Monday, and the overnight
Speaker 2: session for twenty four hour market on Sunday night was
Speaker 2: about three x a typical day.
Speaker 3: So twenty four.
Speaker 2: Hour markets have just been ripping and customers tend to
Speaker 2: be buying the dip. They're more buyers than sellers, which
Speaker 2: we think is a really good sign for the help
Speaker 2: of the retail market.
Speaker 4: We saw on Monday morning, glad as the market's kind
Speaker 4: of tanked and there was a lot of fear out there.
Speaker 4: Some of the more traditional your more traditional competitors have
Speaker 4: problems with logins, and obviously it makes customers very angry,
Speaker 4: especially if they want to get in there and buy
Speaker 4: the dip when it's at five percent and it could
Speaker 4: lose opportunity at any minute that goes by. How did
Speaker 4: your technology hold up during during those shutdowns other platforms.
Speaker 2: Our technology is strong, you know, We've made a lot
Speaker 2: of investments. We were fortunate not to have any issues
Speaker 2: of a significant nature when all of the competitors were
Speaker 2: down and a lot of customers were actually looking to Robinhood.
Speaker 2: And we've had challenges in the past, no doubt about that,
Speaker 2: but that's hardened the company, hardened the infrastructure, and now
Speaker 2: when we see high volumes, we're ready for it. So
Speaker 2: we were happy to see customers moving to Robinhood and
Speaker 2: kind of pointing to us as one of the most
Speaker 2: reliable platforms during this recent bout of volatility.
Speaker 1: Well, the Blue Ocean ats in particular, that's facilitated a
Speaker 1: lot of this twenty four hour trading activity was suspended
Speaker 1: in recent days what exactly happened there and what do
Speaker 1: you do to make sure it doesn't happen again.
Speaker 2: Yeah, So, like you mentioned, Blue Ocean ATS, which facilitates
Speaker 2: the overnight session that's eight pm to four am Eastern,
Speaker 2: it really closes the loop to enable us to offer
Speaker 2: twenty four hour trading for customers. And by the way,
Speaker 2: just want to kind of make it clear, we're at
Speaker 2: the absolute bleeding edge of this technology, so not many
Speaker 2: people are offering this. You basically have to go to
Speaker 2: Robinhood to get this type of experience, and we offered
Speaker 2: over one thousand individual stocks for twenty four hour, So
Speaker 2: we really think this is the future. And you know,
Speaker 2: Blue Ocean had some technical issues. They were not able
Speaker 2: to handle the scale and their infrastructure basically fell over,
Speaker 2: and they've been they've been working to improve that, and
Speaker 2: we have experience dealing with massive scale, so we're being
Speaker 2: as helpful as possible and we look to make sure
Speaker 2: they enable it for all of their customers and all
Speaker 2: of our customers as soon as possible. I think it's
Speaker 2: scheduled to be re enabled next Thursday, so we're getting close.
Speaker 3: But in terms of the future, you know, I've heard.
Speaker 4: Some older market participants express concerns about twenty four to
Speaker 4: seven three sixty five trading just because of the liquidity
Speaker 4: and the way markets were set up.
Speaker 3: Do you think that changes.
Speaker 4: Do we move to a model where clients can trade
Speaker 4: across assets any time?
Speaker 3: Yeah, we're pretty much already there.
Speaker 2: I mean that was a concern until Robinhood really entered
Speaker 2: the market and brought the liquidity, and it.
Speaker 3: Hasn't been a concern.
Speaker 2: We've been actually seeing the liquidity in those markets. The
Speaker 2: volume has exceeded our expectations. We announced in the earnings
Speaker 2: called that volume in the overnight session has approached thirty billion,
Speaker 2: which you know, you're starting to get into significant volumes.
Speaker 2: And as the US markets become more and more global,
Speaker 2: and you're starting to see the APAC countries plug in
Speaker 2: to access US capital markets, I think this is going
Speaker 2: to become more and more important. So absolutely, it's the future,
Speaker 2: and we're proud to be at the bleeding edge of that.
Speaker 1: You know, Glad, it's interesting this morning your stock was
Speaker 1: really on a tear. It's kind of moderated a little bit,
Speaker 1: down a little bit as we speak. Investors are looking
Speaker 1: to understand how to feel about your stock and One
Speaker 1: of the big stories is diversification. You had a record
Speaker 1: number of cash sleep balances. For example, Gold members get
Speaker 1: a very competitive rate on those balances five percent. As
Speaker 1: interest rates drop. What kind of rate are you planning
Speaker 1: on giving investors for a product like that in order
Speaker 1: to stay competitive and how far can it go At
Speaker 1: the end of the day, it does cost you something
Speaker 1: to be giving out five percent.
Speaker 3: Yeah.
Speaker 2: The general principle that we operate by is being a
Speaker 2: technology company is a core competitive advantage and that allows
Speaker 2: us to offer low costs and operate the business giving
Speaker 2: more value to customers. I mean, if you look at
Speaker 2: what Robinin's done, one of the big innovations is we're
Speaker 2: the first digital brokerage. Our competitors have physical stores that
Speaker 2: they staff with people, and in order for them to
Speaker 2: expand they rely on that footprint.
Speaker 3: And so if we think.
Speaker 2: About where advantages are as a technology company making investments
Speaker 2: largely fixed cost base, we can offer lower cost to customers,
Speaker 2: pass more abings back to them and that results in
Speaker 2: these awesome rates and we've seen that resonating with customers.
Speaker 2: Net deposits, as you mentioned, we're a record at over
Speaker 2: thirteen billion.
Speaker 3: We're continuing to see that we.
Speaker 2: Just I mean, frankly, one area where we candidly hadn't
Speaker 2: been doing as well is margin, and we fix that.
Speaker 2: Now we're offering the leading margin rates in the market.
Speaker 2: You can see our margin book up north of fifty
Speaker 2: percent year over year to a two year high of
Speaker 2: five billion, and it's continued to grow so far in
Speaker 2: Q three.
Speaker 3: So I think we're just getting started.
Speaker 2: I think that the overall principles, regardless of the market environment,
Speaker 2: regardless of the product that we're offering, you should assume
Speaker 2: that Robinhood's going to be the value leader and the
Speaker 2: leader and user experience, and the combination of both is
Speaker 2: going to be how we'll continue to grow market share
Speaker 2: as we expand.
Speaker 4: I have a viewer writing in with a question, Lad.
Speaker 4: He's asking why payment for worderflow companies always have outages,
Speaker 4: but IBKR pro, which doesn't participate in payment for orderflow,
Speaker 4: does not experience these outages. I don't know about the
Speaker 4: validity of the question, but a client's writing in with that,
Speaker 4: so I'm going to throw it up to you.
Speaker 2: Well, we didn't have a significant outage so far this week.
Speaker 2: Of course, the Blue Ocean Ats had their issues, But
Speaker 2: that's not Robinhood, even though we rely on them for
Speaker 2: the overnight session and payment for orderflow is just a
Speaker 2: component of the business model.
Speaker 3: It has become the standard.
Speaker 2: Of course, IBKR makes use of that for some of
Speaker 2: their products as well. But yeah, the business model has
Speaker 2: really nothing to do with the technology infrastructure.
Speaker 1: There new technology. Let's talk about it, because of course,
Speaker 1: one of the big acquisitions you made recently and you've
Speaker 1: been throwing through acquisition is in an AI research platform.
Speaker 1: How far Vlad can AI really go to transform Robinhood?
Speaker 3: Looks like.
Speaker 2: I think that Robinhood's been the beneficiary of several technology trends.
Speaker 2: I mean, if you look at the rise of mobile
Speaker 2: and cloud, that really set the foundation that enabled Robinhood
Speaker 2: to be successful and take market share in this new
Speaker 2: industry and really change the dynamics of the industry and
Speaker 2: move everyone to zero commissions. And I think that AI
Speaker 2: has the potential to be another platform shift. And like
Speaker 2: I've said to the team, platform shifts are an opportunity
Speaker 2: to grow market share, to continue to increase what you're
Speaker 2: doing relative to incumbents, and we all have to become.
Speaker 3: Experts in this.
Speaker 2: It's sort of like the first accountants that used spreadsheets
Speaker 2: and VisiCalc in the eighties. There's a huge advantage imparted
Speaker 2: upon those that can adopt the technology early, become conversant
Speaker 2: in it, and use it to accelerate their business. And
Speaker 2: that's what everyone at Robinhood is thinking about. Whether it's
Speaker 2: an AI or cryptocurrency, which are the two big technological
Speaker 2: shifts that are affecting our space.
Speaker 4: You know, I've come to expect AI from a number
Speaker 4: of apps across the range now, not just chat GPT.
Speaker 4: Are you embedding more AI and Robinhood? And also, what's
Speaker 4: the deal with Harmonic it's your AI startup?
Speaker 2: Yeah, yeah, very so Harmonic is separate from Robinhood. And
Speaker 2: basically what Harmonics trying to do is create mathematical superintelligence.
Speaker 2: If you look at the AI models that are out
Speaker 2: there right now, two big problems.
Speaker 3: One is hallucinations.
Speaker 2: They don't generate correct outputs and in fact, they can
Speaker 2: very very confidently say the wrong things. And the second
Speaker 2: problem is they're trained with Internet data, and basically, if
Speaker 2: you look at this generation of models, internet data is
Speaker 2: basically out They've already trained on everything that's out there.
Speaker 2: So Harmonic aims to make a mathematical superintelligence, which is
Speaker 2: something that can solve math problems and quantitative problems at
Speaker 2: a capability and excess of all humans.
Speaker 3: And I think that this is going to be the
Speaker 3: next frontier in AI research.
Speaker 2: And what you'll see is no hallucinations and also a
Speaker 2: lot of the data for training these models being generated
Speaker 2: synthetically through conjecturing and other things.
Speaker 1: Well, do you see a universe in which Robin Hood
Speaker 1: worked with works with Harmonic? More closely, we should also
Speaker 1: mention that this morning, Sequoia Capital, according to the information,
Speaker 1: has discussed funding the startup Harmonic as well. What's the
Speaker 1: future Can Robinhood be working with Harmonic?
Speaker 2: I think it's a little bit too early for that.
Speaker 2: I mean it's very much an applied research lab. They're
Speaker 2: working on solving mathematical problems, and I think over time
Speaker 2: the applications of that are.
Speaker 3: Too many things.
Speaker 2: I mean, if you think about what AI can do
Speaker 2: and what superintelligence, which is kind of the next level
Speaker 2: of AI, can do, the possibilities are profound. I mean,
Speaker 2: we can change the way that software is written, make
Speaker 2: sure that software that's written is verifiably correct. You see
Speaker 2: all of these cybersecurity incidents that are generated by very intricate.
Speaker 3: Small software bugs and glitches.
Speaker 2: A lot of that happens in the cryptocurrency space, So
Speaker 2: I do think there's applications across financial services and the
Speaker 2: broad set of domains that involve technology.
Speaker 1: But also wanting to ask you about this, wells notice
Speaker 1: from the SEC that robin Hood has disclosed regarding crypto activities.
Speaker 1: How is robin Hood planning to respond and what exactly
Speaker 1: is it that they're concerned about most sure?
Speaker 2: Yeah, I mean this landed right around the last earnings call. Basically,
Speaker 2: we have formulated a response, We've spent a lot of
Speaker 2: time making sure that the response is as high quality
Speaker 2: as possible, and we've submitted that. So no updates to share,
Speaker 2: but of course as we have them, we'll share them
Speaker 2: with the broader community.
Speaker 1: Glad, we appreciate your time that as robin Hood, co
Speaker 1: founder and CEO of lad tena