5 ms·

However, they still sell their client order flow to the bank that pays them the most to execute their trades. This isn't illegal and was a HUGE point of Michael

by SEJeff 10y ago

However, they still sell their client order flow to the bank that pays them the most to execute their trades. This isn't illegal and was a HUGE point of Michael Lewis's hack-n-slash book on electronic trading "Flash Boys". If my Robinhood trades of 100 lots or more execute at a few pennies higher than the price when I place the order, I think that is entirely fine. Why? Because it costs 5-10 to trade from Etrade or most other normal brokerage accounts. From what I've seen thusfar (I've got maybe 20k invested with RH), all of the trades have executed at the price I expected them to, or 1 cent higher on very volatile stocks (TSLA in specific). I'm still paying massively less than if I used a traditional broker and RH is making a bit of money by selling my order flow. Win/win really.

nayefc 10y ago
You think Etrade doesn't sell order flow?
- SEJeff 10y ago
  They do, and they still charge you fees to trade, unlike Robinhood!
minimax 10y ago
If my Robinhood trades of 100 lots of more execute at a few pennies higher than the price when I place the order They're not really allowed to do that and I don't think they are doing that. Robinhood (or whatever wholesaler they route your order too) is required to execute your order within the nbbo. They can't just e.g. fill your buy orders a few cents above the national best offer because they want to make some extra money. The regulations don't work that way...
- SEJeff 10y ago
  I'm familar with NBBO, my previous employer (Virtu Financial) and current employer (another large electronic trading firm) are very well known HFT firms but I'm in tech, not the trading side. That doesn't mean the NBBO doesn't change before your order can fully execute? Is it fair to assume you've never heard of RBC's Thor[1] and aren't super familar with maker-taker rebates and the scandal behind them? The NBBO and the proliferation of trading exchanges is in fact what allows this to be possible legally. Like many regulations, it became a tool to perform the types of things it was designed to prevent. This article[2] has an interesting take on the NBBO wrt the SIP that is used. Many firms can calculate their own information faster than the NBBO updates. Note that this isn't the kind of trading (speed only) that my current employer does at all, which is why I sleep well at night. [1] https://en.wikipedia.org/wiki/THOR_(trading_platform) https://en.wikipedia.org/wiki/THOR_(trading_platform) [2] http://www.nanex.net/aqck2/HowSlowIsTheNBBO_%20A_Comparison_with_DirectExchangeFeeds.html http://www.nanex.net/aqck2/HowSlowIsTheNBBO_%20A_Comparison_...
robszumski 10y ago
What are your thoughts on RH being mobile only and how that affects your ability to manage this amount of money. Isn't it hard to keep track of your positions, performance, etc with all those taps and lack of ability to export or read on a real device?
- SEJeff 10y ago
  It bugs the crap out of me that they don't integrate with other services like Mint. Right now I do a few things. I manually track my position using personal capital (I can't recommend this service / app enough for tracking ALL of your investments and planning for your future). It is kind of like mint, but exclusively for your investments (https://www.personalcapital.com/ https://www.personalcapital.com/) I've written a fair bit of code (python) to parse my statements and make sure things true up with what personal capital says. The app thing is annoying, but RH just closed 110M and they'll get more functionality in the future. You're not the first person to ask that and I figure eventually they'll have to open things up or they'll lose customers (like me). Right now, I'm ok with using it for a year or two provided they allow me to continue no-fee trades.
  - wwalser 10y ago
    I've been retargeted by Personal Capital on FB for several months now. Are you recommending the "free financial tools" from Personal Capital? I sort of assumed the "free" was just there to entice you into paying for their wealth management services which look like every other robo but with higher fees. Are the tools actually good? Several low-cost robos (Wealthfront and Betterment) now have fairly good retirement planning interfaces which take your outside accounts into consideration and Mint has investment tracking now as well.
    - SEJeff 10y ago
      They very politely try to upsell you on their wealth management "call and speak with our professional advisers today!" services, which I simply decline. Their ability to track investments seems superior to mint for the things I want to do, but to each their own. If you just use the free tier, it is great. I simply use it to make sure I don't need to do much rebalancing of my investments every year based on my investment goals and risk tolerance. Having been a mint user since early 2007, I actually prefer PC for the investment only advice, and mint for everything else.

by SEJeff 10y ago

nayefc 10y ago

You think Etrade doesn't sell order flow?

SEJeff 10y ago
They do, and they still charge you fees to trade, unlike Robinhood!

minimax 10y ago

If my Robinhood trades of 100 lots of more execute at a few pennies higher than the price when I place the order They're not really allowed to do that and I don't think they are doing that. Robinhood (or whatever wholesaler they route your order too) is required to execute your order within the nbbo. They can't just e.g. fill your buy orders a few cents above the national best offer because they want to make some extra money. The regulations don't work that way...

SEJeff 10y ago
I'm familar with NBBO, my previous employer (Virtu Financial) and current employer (another large electronic trading firm) are very well known HFT firms but I'm in tech, not the trading side. That doesn't mean the NBBO doesn't change before your order can fully execute? Is it fair to assume you've never heard of RBC's Thor[1] and aren't super familar with maker-taker rebates and the scandal behind them? The NBBO and the proliferation of trading exchanges is in fact what allows this to be possible legally. Like many regulations, it became a tool to perform the types of things it was designed to prevent. This article[2] has an interesting take on the NBBO wrt the SIP that is used. Many firms can calculate their own information faster than the NBBO updates. Note that this isn't the kind of trading (speed only) that my current employer does at all, which is why I sleep well at night. [1] https://en.wikipedia.org/wiki/THOR_(trading_platform) https://en.wikipedia.org/wiki/THOR_(trading_platform) [2] http://www.nanex.net/aqck2/HowSlowIsTheNBBO_%20A_Comparison_with_DirectExchangeFeeds.html http://www.nanex.net/aqck2/HowSlowIsTheNBBO_%20A_Comparison_...

robszumski 10y ago

What are your thoughts on RH being mobile only and how that affects your ability to manage this amount of money. Isn't it hard to keep track of your positions, performance, etc with all those taps and lack of ability to export or read on a real device?

SEJeff 10y ago
It bugs the crap out of me that they don't integrate with other services like Mint. Right now I do a few things. I manually track my position using personal capital (I can't recommend this service / app enough for tracking ALL of your investments and planning for your future). It is kind of like mint, but exclusively for your investments (https://www.personalcapital.com/ https://www.personalcapital.com/) I've written a fair bit of code (python) to parse my statements and make sure things true up with what personal capital says. The app thing is annoying, but RH just closed 110M and they'll get more functionality in the future. You're not the first person to ask that and I figure eventually they'll have to open things up or they'll lose customers (like me). Right now, I'm ok with using it for a year or two provided they allow me to continue no-fee trades.
- wwalser 10y ago
  I've been retargeted by Personal Capital on FB for several months now. Are you recommending the "free financial tools" from Personal Capital? I sort of assumed the "free" was just there to entice you into paying for their wealth management services which look like every other robo but with higher fees. Are the tools actually good? Several low-cost robos (Wealthfront and Betterment) now have fairly good retirement planning interfaces which take your outside accounts into consideration and Mint has investment tracking now as well.
  - SEJeff 10y ago
    They very politely try to upsell you on their wealth management "call and speak with our professional advisers today!" services, which I simply decline. Their ability to track investments seems superior to mint for the things I want to do, but to each their own. If you just use the free tier, it is great. I simply use it to make sure I don't need to do much rebalancing of my investments every year based on my investment goals and risk tolerance. Having been a mint user since early 2007, I actually prefer PC for the investment only advice, and mint for everything else.