3 ms·
There aren't actually any transactions fees to absorb. Wholesale brokers (think Citadel) pay retail brokers (think Robin Hood) for the privilege of executing th
by scott00 9y ago
There aren't actually any transactions fees to absorb. Wholesale brokers (think Citadel) pay retail brokers (think Robin Hood) for the privilege of executing their orders.
- cturner 9y agoI found 'RHF SEC Rule 606 and 607 Disclosure' on their disclosures page. https://www.robinhood.com/legal/ https://www.robinhood.com/legal/
- hn9780470248775 9y agoWhy?
- scott00 9y agoBecause, for the most part, retail investors are not well-informed investors and are willing to cross the bid-ask spread. To simplify dramatically, suppose Citadel thinks the fair value of a stock is 25.185, the market is 25.18-25.19, and a Robin Hood customer wants to pay 25.19 to buy 1 share of the stock. If they buy from Citadel, Citadel makes $0.0050 on average. Given those basic economics, it makes sense for Citadel to pay, say $0.0018, to make sure that the Robin Hood customer buys from them instead of from Knight.