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Oddly enough I suspect the result will be lobbying for stricter financial privacy regulations. Almost half of Robinhood's revenue is from selling data.[1] Big

Oddly enough I suspect the result will be lobbying for stricter financial privacy regulations. Almost half of Robinhood's revenue is from selling data.[1] Big banks won't be able to compete on that front and most of the big players don't participate/make enough money on order flow sales that they'd miss it if it were prohibited. So the banks will do what they do best: lobby congress & regulators to legislate & regulate their competition away. Though in this case, I would argue that's in the best interest of the consumer. [1]https://www.bloomberg.com/news/articles/2018-10-15/robinhood-gets-almost-half-its-revenue-in-controversial-bargain-with-high-speed-traders https://www.bloomberg.com/news/articles/2018-10-15/robinhood...

consumer451 8y ago
From your link: > Almost all retail brokerages employ the practice
- elliekelly 8y ago
  In options maybe, not in equities. Bank of America doesn't, Vanguard doesn't, none of the firms I've worked at do. Bernie Madoff basically invented the "strategy" and most firms aren't exactly looking to emulate him. The FSA (U.K. equivalent to the SEC) effectively banned the practice a few years ago (2010 maybe?) which curtailed the practice a lot. I'm not sure about other states but the Massachusetts AG's office started looking into it last year, too. Its essentially a kickback paid in exchange for information that allows the "smart money" institutional investors to front-run the "dumb money" retail investors.
  - SEJeff 8y ago
    This comment couldn't be further from the truth. You sound like you've read flash boys without reading the rebuttal that shows how it is entirely wrong. Here let me link it to you: https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-Frequency-ebook/dp/B00P0QI2M2 https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-... I used to work with Peter Kovac, the author of that book, and can personally vouch for his integrity. He's a really humble and stand up guy.
kevin_thibedeau 8y ago
You're data is already being sold when you spend so adding on your bank is just another drop in the bucket.
SEJeff 8y ago
I don't think this means what you think it means... Every single broker like Robinhood sells order flow to electronic trading firms. This flow is then executed faster due to improved market access. All of that to say that you're probably getting better execution because Robinhood wasn't stupid enough to try to go through some crappy broker or build their own order entry system. Also, the order data can not be mapped back to you. That simply isn't how the stock market works at all. Every single other broker (Schwab, Merril Lynch, etc) does this. Source: I work for one of those big market making electronic trading firms, the kind you try to demonize but fail fundamentally to understand.
- elliekelly 8y ago
  > I don't think this means what you think it means... You might work in IT for a market making electronic trading firm (it's not big, I looked them up). I'm a securities regulation attorney. I've worked for banks, hedge funds, and RIAs. This is so far away from best execution that any attempt to argue that this is to the consumer's benefit shows you fundamentally do not understand the fiduciary duties that brokers are supposed to owe to their clients. You're parroting the party line without fully understanding how the system works (and why should you? you're just a distributed systems engineer) yet you have the audacity to tell me in another comment that I've "read Flash Boys" without doing any research and don't understand how the stock market works. Okay, bud.

consumer451 8y ago

From your link: > Almost all retail brokerages employ the practice

elliekelly 8y ago
In options maybe, not in equities. Bank of America doesn't, Vanguard doesn't, none of the firms I've worked at do. Bernie Madoff basically invented the "strategy" and most firms aren't exactly looking to emulate him. The FSA (U.K. equivalent to the SEC) effectively banned the practice a few years ago (2010 maybe?) which curtailed the practice a lot. I'm not sure about other states but the Massachusetts AG's office started looking into it last year, too. Its essentially a kickback paid in exchange for information that allows the "smart money" institutional investors to front-run the "dumb money" retail investors.
- SEJeff 8y ago
  This comment couldn't be further from the truth. You sound like you've read flash boys without reading the rebuttal that shows how it is entirely wrong. Here let me link it to you: https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-Frequency-ebook/dp/B00P0QI2M2 https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-... I used to work with Peter Kovac, the author of that book, and can personally vouch for his integrity. He's a really humble and stand up guy.

kevin_thibedeau 8y ago

You're data is already being sold when you spend so adding on your bank is just another drop in the bucket.

SEJeff 8y ago

I don't think this means what you think it means... Every single broker like Robinhood sells order flow to electronic trading firms. This flow is then executed faster due to improved market access. All of that to say that you're probably getting better execution because Robinhood wasn't stupid enough to try to go through some crappy broker or build their own order entry system. Also, the order data can not be mapped back to you. That simply isn't how the stock market works at all. Every single other broker (Schwab, Merril Lynch, etc) does this. Source: I work for one of those big market making electronic trading firms, the kind you try to demonize but fail fundamentally to understand.

elliekelly 8y ago
> I don't think this means what you think it means... You might work in IT for a market making electronic trading firm (it's not big, I looked them up). I'm a securities regulation attorney. I've worked for banks, hedge funds, and RIAs. This is so far away from best execution that any attempt to argue that this is to the consumer's benefit shows you fundamentally do not understand the fiduciary duties that brokers are supposed to owe to their clients. You're parroting the party line without fully understanding how the system works (and why should you? you're just a distributed systems engineer) yet you have the audacity to tell me in another comment that I've "read Flash Boys" without doing any research and don't understand how the stock market works. Okay, bud.