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>their core strategy, which is spending what would otherwise be a marketing budget on keeping commissions at zero, making money on the other ways "Making money

>their core strategy, which is spending what would otherwise be a marketing budget on keeping commissions at zero, making money on the other ways "Making money others ways" aka stripping their clients of financial privacy by selling their clients' investment-decision data: "Robinhood Is Making Millions Selling Out Their Millennial Customers To High-Frequency Traders"[1] If your investment brokerage firm's strategy is to use you as a sucker, no marginal gain in interest rate is worth it. [1]https://seekingalpha.com/article/4205379-robinhood-making-millions-selling-millennial-customers-high-frequency-traders https://seekingalpha.com/article/4205379-robinhood-making-mi...

dec0dedab0de 8y ago
Aren't all orders eventually public anyway? I get that the liquidity that "market makers" claim to create is not really that beneficial to society, but as long as you're not trying to use robinhood to compete with the high speed traders, I don't see a problem with it.
- keredson 8y ago
  > Aren't all orders eventually public anyway? no. most orders are not executed on the public exchanges, but by internal matching via your broker and a market maker. (also most exchanges only support trades in multiples of 100 shares.)
  - ycombobreaker 8y ago
    Exchanges handle odd lot orders nowadays. Maybe some brokers or dark pools do not, but they are not exchanges (their quote is not protected, or they show no quote). I believe all customer trades/executions on actual securities should eventually be publicly visible, though there may be a small delay for them to "print to the tape".
- Nasrudith 8y ago
  Not doing so or at least in a condescended form is kind of operating a fraudulent exchange. It is kosher to bundle 50 buy orders of 1 stock into 1 order or visa versa - get a bunch of little orders that adds up to a cheaper option. If it doesn't work out refund and inform that it failed to go through. If they asked for 1 share at $25 and you legitimately give it to them it isn't fraud. It is another to say "buy" Tesla shares for people when you really shovel it into another investment and work out what they owe when you think they will just go bankrupt and Theranos is the way of thw future....
vasilipupkin 8y ago
privacy has nothing to do with it as all trades are reported anyway.
guelo 8y ago
All the big banks and Visa and MasterCard sell your transaction data to marketers.
signet 8y ago
That's not true. When Robinhood (or any other retail broker) sends orders to a 3rd party to be filled, there is no way for that 3rd party to see who is sending the order other than it's coming from Robinhood. Robinhood maintains their own book customer orders; the FIX protocol that the orders are coded in doesn't even support that kind of granular info. There are valid criticisms of payment for order flow but privacy isn't one of them.
abuckenheimer 8y ago
Yes HFT buys trade flow from robin hood because they make more money executing against it but that's not actually to the detriment of the people on the robin hood app. The main way HFT firms make money is by making a market, they offer to buy and sell stocks cheaper than anyone else and get paid by people crossing the spread and sometimes exchange fees. The reason robinhood trade flow is valuable to HFT firms Isn't because they are trading against "dumb" millennials but because they know millennials aren't likely to move the market playing around on their smartphone. HFT firms can collect a small rent sitting in between millenials trading with one another without the risk of being on the wrong side of a trade that materially moves the price of a stock. Matt Levine does great write ups on this stuff, would highly recommend: https://www.bloomberg.com/opinion/articles/2018-10-16/carl-icahn-wants-to-fight-dell-again https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i...
- jcoffland 8y ago
  The stock market is a zero sum game. If HFTs are making money then someone else's is losing it. The other traders who's trades are closest are the most likely losers. HFTs will tell you what a great liquidity service they provide but they are doing nothing more than using the equivalent of insider information to skim the cream off the top.
  - gruez 8y ago
    >The stock market is a zero sum game. If HFTs are making money then someone else's is losing it. But who's that "someone else"? It's not the robinhood customer, because they're getting at least the best price on NMS[1]. So what's the issue? Would you rather pay $10/trade so your trade gets posted directly to the exchange and the profit goes to some random investment bank or daytrader rather than the HFT firm? [1] https://en.wikipedia.org/wiki/Payment_for_order_flow#Legality https://en.wikipedia.org/wiki/Payment_for_order_flow#Legalit...
    - y_molodtsov 8y ago
      In 2018 people like to scream about “selling their data” way too much.
throwawaymath 8y ago
That's an extremely poor article. Anyone can throw a hot take on SeekingAlpha; that doesn't mean their take is worth anything. 1. I don't know why the title mentions "millenial" customers in particular, because every brokerage does this across all demographics, 2. This activity is not "selling out" customers. If you believe that customers are "suckers" because their order flow is sold to high frequency traders, you have a very fundamental misconception about high frequency trading and its role in market making, 3. There is no codified definition of, or law protecting, "financial privacy" in the sense of order flow. This data isn't connected to you as an individual, just as you can't see which individuals or companies are placing bids and asks in the order book just because you can see the amounts and prices. All trades in the market are publicly reported regardless of whether or not your order flow is sold. It never ceases to amaze me how the term "high frequency trading" can compel people to pontificate about things they clearly don't understand. You'd think we'd have collectively moved on from the Flash Boys misconceptions by now. Yet here we are, with an article talking about high frequency traders as some kind of financial boogeyman in 2018.

dec0dedab0de 8y ago

Aren't all orders eventually public anyway? I get that the liquidity that "market makers" claim to create is not really that beneficial to society, but as long as you're not trying to use robinhood to compete with the high speed traders, I don't see a problem with it.

keredson 8y ago
> Aren't all orders eventually public anyway? no. most orders are not executed on the public exchanges, but by internal matching via your broker and a market maker. (also most exchanges only support trades in multiples of 100 shares.)
- ycombobreaker 8y ago
  Exchanges handle odd lot orders nowadays. Maybe some brokers or dark pools do not, but they are not exchanges (their quote is not protected, or they show no quote). I believe all customer trades/executions on actual securities should eventually be publicly visible, though there may be a small delay for them to "print to the tape".
Nasrudith 8y ago
Not doing so or at least in a condescended form is kind of operating a fraudulent exchange. It is kosher to bundle 50 buy orders of 1 stock into 1 order or visa versa - get a bunch of little orders that adds up to a cheaper option. If it doesn't work out refund and inform that it failed to go through. If they asked for 1 share at $25 and you legitimately give it to them it isn't fraud. It is another to say "buy" Tesla shares for people when you really shovel it into another investment and work out what they owe when you think they will just go bankrupt and Theranos is the way of thw future....

vasilipupkin 8y ago

privacy has nothing to do with it as all trades are reported anyway.

guelo 8y ago

All the big banks and Visa and MasterCard sell your transaction data to marketers.

signet 8y ago

That's not true. When Robinhood (or any other retail broker) sends orders to a 3rd party to be filled, there is no way for that 3rd party to see who is sending the order other than it's coming from Robinhood. Robinhood maintains their own book customer orders; the FIX protocol that the orders are coded in doesn't even support that kind of granular info. There are valid criticisms of payment for order flow but privacy isn't one of them.

abuckenheimer 8y ago

Yes HFT buys trade flow from robin hood because they make more money executing against it but that's not actually to the detriment of the people on the robin hood app. The main way HFT firms make money is by making a market, they offer to buy and sell stocks cheaper than anyone else and get paid by people crossing the spread and sometimes exchange fees. The reason robinhood trade flow is valuable to HFT firms Isn't because they are trading against "dumb" millennials but because they know millennials aren't likely to move the market playing around on their smartphone. HFT firms can collect a small rent sitting in between millenials trading with one another without the risk of being on the wrong side of a trade that materially moves the price of a stock. Matt Levine does great write ups on this stuff, would highly recommend: https://www.bloomberg.com/opinion/articles/2018-10-16/carl-icahn-wants-to-fight-dell-again https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i...

jcoffland 8y ago
The stock market is a zero sum game. If HFTs are making money then someone else's is losing it. The other traders who's trades are closest are the most likely losers. HFTs will tell you what a great liquidity service they provide but they are doing nothing more than using the equivalent of insider information to skim the cream off the top.
- gruez 8y ago
  >The stock market is a zero sum game. If HFTs are making money then someone else's is losing it. But who's that "someone else"? It's not the robinhood customer, because they're getting at least the best price on NMS[1]. So what's the issue? Would you rather pay $10/trade so your trade gets posted directly to the exchange and the profit goes to some random investment bank or daytrader rather than the HFT firm? [1] https://en.wikipedia.org/wiki/Payment_for_order_flow#Legality https://en.wikipedia.org/wiki/Payment_for_order_flow#Legalit...
  - y_molodtsov 8y ago
    In 2018 people like to scream about “selling their data” way too much.

throwawaymath 8y ago

That's an extremely poor article. Anyone can throw a hot take on SeekingAlpha; that doesn't mean their take is worth anything. 1. I don't know why the title mentions "millenial" customers in particular, because every brokerage does this across all demographics, 2. This activity is not "selling out" customers. If you believe that customers are "suckers" because their order flow is sold to high frequency traders, you have a very fundamental misconception about high frequency trading and its role in market making, 3. There is no codified definition of, or law protecting, "financial privacy" in the sense of order flow. This data isn't connected to you as an individual, just as you can't see which individuals or companies are placing bids and asks in the order book just because you can see the amounts and prices. All trades in the market are publicly reported regardless of whether or not your order flow is sold. It never ceases to amaze me how the term "high frequency trading" can compel people to pontificate about things they clearly don't understand. You'd think we'd have collectively moved on from the Flash Boys misconceptions by now. Yet here we are, with an article talking about high frequency traders as some kind of financial boogeyman in 2018.