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