CME Group has struck a deal with Robinhood to bring its futures products to the platform with significantly discounted execution fees compared to competitors, a move that underscores CME’s strategy to boost trading revenues by attracting retail flow.
The integration will provide Robinhood’s US retail customers with access to futures contracts across five major asset classes, including the four leading U.S. equity indices—S&P 500, Nasdaq-100, Russell 2000, and Dow Jones Industrial Average—along with cryptocurrencies, major FX currency pairs, and commodities.
Robinhood’s new futures offering comes with a notably aggressive commission structure, with execution fees set at just US$0.50 per contract, significantly undercutting competitors such as Interactive Brokers (US$0.85 per contract) and E-Trade (US$1.50 per contract). This pricing strategy aligns with CME’s broader effort to attract more retail participation, trading off lower per-trade fees for higher transaction volumes.
Julie Winkler, chief commercial officer at CME Group, highlighted the strategic importance of expanding retail access to futures trading, calling it “an integral step in educating and empowering this new crop of investors.” Meanwhile, JB Mackenzie, vice president and general manager of futures and international at Robinhood, emphasised that launching CME futures marks “a significant step forward in making Robinhood the best place for active traders,” pointing to a newly introduced mobile trading ladder designed for ease of use and efficiency.
Neither CME nor Robinhood, who were approached for comments, have provided further details on the financial arrangements underpinning their partnership, leaving open questions about how CME is providing Robinhood with discounts for the fee reductions. Until now, the business model pursued by Robinhood is dependent on a Payment For Order Flow (PFOF) model to procure its clients with “free” execution, a practice which is legal in the US but banned in other jurisdictions.
In its latest 10-Q filing, dated November 2024, CME reported an increase in transaction and clearing fees of $387 million for the nine months to September 2024, offset by a decrease due to the average rate per contract of US$33 million. This suggests that CME has considerable headroom for further contract rate reductions to attract retail customer flow from Robinhood.
Robinhood has been found to have failed across a broad range of its obligations and provisions of federal securities laws by regulators, while its use of PFOF, and the exposure of retail customers to high-risk trades, have attracted regulatory scrutiny in the past, and most recently the company attracted a US$45 million fine for record-keeping failures.
IBKR has been approached for comments.
Read more: Robinhood hit with US$45m SEC fine as market maker payments surge – Global Trading
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