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Great catch, missed that during the article skim. Doesn't this also enable front-running? Regardless, this is useful info for HFT funds, right?

celim307 9y ago
They explicitly call out in the article they don't do that
- tomp 9y ago
  No, they didn't. It was more of a "non-denial". > Robinhood also earns money from rebates its gets for directing its order flow to broker dealers, though Bhatt insists “We do not sell data to anyone. We have never sold data to anyone. We just do not do that.” There have been misconceptions that Robinhood sells high-frequency traders its data to help them trade against the startup’s customers. But Bhatt says “The rules around this stuff as so tight. We’re not a social media company. If we even step slightly out of line with anything we all go to jail.” Basically all they're claiming is that they're following the rules - i.e. if the rules allow selling "data" (or something that we won't call "data" but "order flow" or something) to HTFs or banks' dark pools, they're not saying they don't do it!
  - morsch 9y ago
    How would that not directly contradict "We do not sell data to anyone."?
    - tomp 9y ago
      > Robinhood also earns money from rebates its gets for directing its order flow to broker dealers So they're selling some data (as opposed to running directly on an exchange, without any intermediaries). Or maybe not "selling" in the strict sense (I give you data, you give me money), but in an indirect way (I give you data, and you give me discount on your other services).
      - deleted 9y ago
        [deleted]
      - harryh 9y ago
        I give you data, and you give me discount on your other services That's not what rebate means in this context. It is, in fact, actual money. Robinhood also isn't just giving someone data. They're sending order flow to various market makers. Not data about the orders but the actual flow in need of execution.
        tomp 9y ago
        But that's exactly the point; that flow is data, and it's valuable, especially to market makers. If it weren't, they wouldn't be paying for it...
        harryh 9y ago
        That flow isn't really data. Like sure, ok, it's data in the sense that everything is data. But that's not the point. The point of retail flow is that it's not based on other market events but is based on mundane things like regular monthly 401k deposits. This flow is a source of customers for market makers. Those customers get charged a fee. A % of that fee is rebated back to Robin Hood (or other retail brokers) for being originators of the customers.
Danieru 9y ago
Front running is something which only exists when you need to fill an order which is too large for one stock exchange's ledger at that price. For retail trader that should not be a common case.
- makeset 9y ago
  Front-running is an illegal practice that has absolutely nothing to do with order size. https://en.wikipedia.org/wiki/Front_running https://en.wikipedia.org/wiki/Front_running
harryh 9y ago
Front running is illegal. Robinhood is regulated by the SEC. If they were front running they would get caught and shut down.

celim307 9y ago

They explicitly call out in the article they don't do that

tomp 9y ago
No, they didn't. It was more of a "non-denial". > Robinhood also earns money from rebates its gets for directing its order flow to broker dealers, though Bhatt insists “We do not sell data to anyone. We have never sold data to anyone. We just do not do that.” There have been misconceptions that Robinhood sells high-frequency traders its data to help them trade against the startup’s customers. But Bhatt says “The rules around this stuff as so tight. We’re not a social media company. If we even step slightly out of line with anything we all go to jail.” Basically all they're claiming is that they're following the rules - i.e. if the rules allow selling "data" (or something that we won't call "data" but "order flow" or something) to HTFs or banks' dark pools, they're not saying they don't do it!
- morsch 9y ago
  How would that not directly contradict "We do not sell data to anyone."?
  - tomp 9y ago
    > Robinhood also earns money from rebates its gets for directing its order flow to broker dealers So they're selling some data (as opposed to running directly on an exchange, without any intermediaries). Or maybe not "selling" in the strict sense (I give you data, you give me money), but in an indirect way (I give you data, and you give me discount on your other services).
    - deleted 9y ago
      [deleted]
    - harryh 9y ago
      I give you data, and you give me discount on your other services That's not what rebate means in this context. It is, in fact, actual money. Robinhood also isn't just giving someone data. They're sending order flow to various market makers. Not data about the orders but the actual flow in need of execution.
      - tomp 9y ago
        But that's exactly the point; that flow is data, and it's valuable, especially to market makers. If it weren't, they wouldn't be paying for it...
        harryh 9y ago
        That flow isn't really data. Like sure, ok, it's data in the sense that everything is data. But that's not the point. The point of retail flow is that it's not based on other market events but is based on mundane things like regular monthly 401k deposits. This flow is a source of customers for market makers. Those customers get charged a fee. A % of that fee is rebated back to Robin Hood (or other retail brokers) for being originators of the customers.

Danieru 9y ago

Front running is something which only exists when you need to fill an order which is too large for one stock exchange's ledger at that price. For retail trader that should not be a common case.

makeset 9y ago
Front-running is an illegal practice that has absolutely nothing to do with order size. https://en.wikipedia.org/wiki/Front_running https://en.wikipedia.org/wiki/Front_running

harryh 9y ago

Front running is illegal. Robinhood is regulated by the SEC. If they were front running they would get caught and shut down.