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Illustration: Sarah Grillo/Axios

Millions of stock and options traders were effectively shut out of the market for all of Monday as well as two hours of early trade on Tuesday.

Driving the news: The culprit was Robinhood, a fast-growing stock-trading platform that inexplicably face-planted on a day when trading volume surged and the stock market rose by 4%.

Why it matters: Robinhood was valued during its last fundraising round in July at $7.6 billion, based on the thesis that bringing Silicon Valley's disruptive norms to Wall Street would help the company capture an audience of fast-twitch millennials. This week's news is a reminder of why old-fashioned trustworthiness has its merits.

The big picture: Robinhood's unbeatable price of $0 for stock trades ultimately prompted all its major competitors to follow suit. That, in turn, begat mega-mergers: Morgan Stanley is buying E-Trade, while Charles Schwab is buying TD Ameritrade.

Be smart: Now that giants like Fidelity and Vanguard Group have massive scale and $0 trades, it's hard to see where Robinhood's comparative advantage lies. The 7-year-old startup risks finding itself racing to the bottom, signing up mainly options traders who don't qualify for margin accounts anywhere else.

Flashback: Robinhood is known for overreaching. At the end of 2018, it announced a checking account and was then forced to ignominiously unannounce it. In 2019, users found a glitch that gave them "infinite leverage," and Robinhood was also fined $1.25 million for not giving its users the best prices on stocks.

  • The outage this week is Robinhood's worst blunder yet, and only serves to reinforce the impression that the brokerage is not robust enough to stand up to the giants in the space.

What they're saying: Robinhood is blaming "instability in a part of our infrastructure that allows our systems to communicate with each other" for the outages on both Monday and Tuesday. The company is saying that service is now "fully restored."

The bottom line: Wall Street is built on trust. It's hard to see why any of Robinhood's customers should trust it at this point.

Go deeper

COVID cases and deaths are on the rise

Expand chart
Data: N.Y. Times; Cartogram: Kavya Beheraj/Axios

COVID-19 cases and deaths are rising all across the U.S. even before the Omicron variant takes hold.

Why it matters: The holidays — and the inevitable spread of Omicron — will only heighten the risks that unvaccinated Americans face from COVID, in all its forms.

Updated 1 hour ago - Health

New Zealand aims to create smoke-free generation with tobacco ban

New Zealand Prime Minister Jacinda Ardern at a December news conference in Auckland, New Zealand. Photo: Phil Walter/Getty Images

New Zealand officials announced Thursday legislative plans to outlaw smoking by making it illegal to sell or supply tobacco products to the next generation as part of a lifetime ban.

Why it matters: "People aged 14 when the law comes into effect will never be able to legally purchase tobacco," Associate Health Minister Ayesha Verrall said in a statement announcing the proposed law, part of the Smokefree 2025 Action Plan.

California father and son accused of "reckless arson" in Calder Fire

Firefighters at the Caldor Fire along Highway 89 west of Lake Tahoe, California, in September. Photo: Wally Skalij/Los Angeles Times via Getty Images

California officials said they arrested a father and son Wednesday on suspicion of starting the Caldor Fire, which threatened the Lake Tahoe area as it burned for over two months earlier this year. They deny any wrongdoing.

Why it matters: The wildfire was the 15th-biggest ever recorded in California, razing more than 1,000 structures, forcing thousands to evacuate and injuring five people as it burned across nearly 222,000 acres of land in El Dorado, Amador and Alpine counties.