[kasey_junk]

Depending on what you mean by "spreads" that is probably not correct.

One thing they are certainly doing is selling their order flow. Large HFT firms like Knight & Citadel pay brokerages like Robinhood for the privilege of routing retail orders. You can find the documents in their "Disclosure Library".

https://brokerage-static.s3.amazonaws.com/assets/robinhood/l...

http://public.s3.com/rule606/apex/APEX_1Q2015_Rule606.pdf

It's important to note that it is likely that all retail brokers are doing this, so this is not how Robinhood is able to offer no fees.

Either they have significant cost advantages (new infrastructure/cheaper labor etc) or they have better deals with the people executing their orders.

[edit] Also http://external.s3.com/rule606/apex/APEX_2015Q1Disclosure.pd...