6 ms·

So do they front run then?

by sjg007 7y ago

mieseratte 7y ago
Of course not! They just sell your data to the people who do.
- Lazare 7y ago
  If you have no idea what you're talking about, why even comment? They don't sell the data, they sell the orders, and the people that buy the orders and execute them aren't front-running them either. You can only front-run an informed trade, and the entire reason they're buying the orders is because they're uniformed. Nobody is front running some guy day trading AAPL on their lunch break. Not just because it's illegal and easy to catch (although it is both of those), but because it's mathmatically not even possible. If your trade is not, on its own, meaningfully moving the share price, you can't be front run.
  - AnimalMuppet 7y ago
    Perhaps you could comment without the personal insults. You have good info to share. Let it speak for itself.
  - mieseratte 7y ago
    1) I used to work in HFT, so I know what I’m talking about. 2) While it’s a joke, I have no knowledge that Schwaab engages in anything related to front-running: > Nobody is front running some guy day trading AAPL on their lunch break. Just like Google doesn’t spy on you, they spy on everyone together. If this wasn’t a problem SEC wouldn’t have pressed for something like the CAT. Perhaps you don’t know what you’re talking about.
lbotos 7y ago
They use Payment for Order Flow: https://en.wikipedia.org/wiki/Payment_for_order_flow https://en.wikipedia.org/wiki/Payment_for_order_flow (Just like Robinhood - https://support.robinhood.com/hc/en-us/articles/360001400766-Stocks-Order-Routing-and-Execution-Quality https://support.robinhood.com/hc/en-us/articles/360001400766...)
- devicetray0 7y ago
  Could you break this down for me? As a small-time investor, how much am I getting screwed when I use say, Robinhood?
  - tick_tock_tick 7y ago
    If you're day trading a lot! If you buy and hold most of your investments 6+ months it's not worth worrying about.
    - adrr 7y ago
      If your day trading millions of dollars of shares, it could matter. Retail rarely make trades that can’t be filled with one order. Even if your moving large amount of shares, you can always do limit orders .
    - scurvy 7y ago
      Day trading stocks is silly. Futures are much better instruments for frequent trading from cost, tax, ease, liquidity, etc.
  - lbotos 7y ago
    Think about it this way, as a small-time investor, you won't always get the best price. Your strategy should not be dependent on that. You should be building positions or trading appropriately to your scale. (Read: Buy and hold or trading at stop-loss prices, not market orders) Said another way: The big guns will likely beat you, and you over time with LOTS of trading may lose a few % but for most small fries it shouldn't even matter. That said, it looks like Robinhood is making more than most on their orderflow: > In September 2018, Logan Kane, a contributor to Seeking Alpha, stated that Robinhood's payment for order flow generated ten times the revenue as other brokers receive from market makers for the same volume. Bloomberg has analyzed Robinhood's reports to the Securities and Exchange Commission (SEC), and calculates that Robinhood generates almost half of its income from payment for order flow. https://www.investopedia.com/articles/active-trading/020515/how-robinhood-makes-money.asp https://www.investopedia.com/articles/active-trading/020515/...
cpwright 7y ago
The largest amount of revenue comes from the interest spread on cash balances that people have in their accounts.
Lazare 7y ago
Of course not. That's 1) deeply illegal and 2) wouldn't even be profitable. Edit: I love how I'm getting downvoted for stating the truth. Nothing gets people with no knowledge of financial markets as irrationally excited as HFT and payment for order flow.
- tptacek 7y ago
  I think you're pretty much completely on the right side of this and your other comments on this thread have been really strong, but this comment would be much stronger without the coda about downvoting, which (1) contravenes a guideline on the site and (2) really just invites spite voting.
  - Lazare 7y ago
    Arg, good point. Unfortunately, it's too late to edit or delete the comment now. Shouldn't comment right before lunch; I get grumpy apparently. :(
Fomite 7y ago
They make most of their money from interest on parked cash (they also offer managed portfolios and the like, but I've never felt the need).
- turk73 7y ago
  Paypal's original patented business plan was to do this, too.

So do they front run then?

by sjg007 7y ago

So do they front run then?

mieseratte 7y ago

Of course not! They just sell your data to the people who do.

Lazare 7y ago
If you have no idea what you're talking about, why even comment? They don't sell the data, they sell the orders, and the people that buy the orders and execute them aren't front-running them either. You can only front-run an informed trade, and the entire reason they're buying the orders is because they're uniformed. Nobody is front running some guy day trading AAPL on their lunch break. Not just because it's illegal and easy to catch (although it is both of those), but because it's mathmatically not even possible. If your trade is not, on its own, meaningfully moving the share price, you can't be front run.
- AnimalMuppet 7y ago
  Perhaps you could comment without the personal insults. You have good info to share. Let it speak for itself.
- mieseratte 7y ago
  1) I used to work in HFT, so I know what I’m talking about. 2) While it’s a joke, I have no knowledge that Schwaab engages in anything related to front-running: > Nobody is front running some guy day trading AAPL on their lunch break. Just like Google doesn’t spy on you, they spy on everyone together. If this wasn’t a problem SEC wouldn’t have pressed for something like the CAT. Perhaps you don’t know what you’re talking about.

lbotos 7y ago

They use Payment for Order Flow: https://en.wikipedia.org/wiki/Payment_for_order_flow https://en.wikipedia.org/wiki/Payment_for_order_flow (Just like Robinhood - https://support.robinhood.com/hc/en-us/articles/360001400766-Stocks-Order-Routing-and-Execution-Quality https://support.robinhood.com/hc/en-us/articles/360001400766...)

devicetray0 7y ago
Could you break this down for me? As a small-time investor, how much am I getting screwed when I use say, Robinhood?
- tick_tock_tick 7y ago
  If you're day trading a lot! If you buy and hold most of your investments 6+ months it's not worth worrying about.
  - adrr 7y ago
    If your day trading millions of dollars of shares, it could matter. Retail rarely make trades that can’t be filled with one order. Even if your moving large amount of shares, you can always do limit orders .
  - scurvy 7y ago
    Day trading stocks is silly. Futures are much better instruments for frequent trading from cost, tax, ease, liquidity, etc.
- lbotos 7y ago
  Think about it this way, as a small-time investor, you won't always get the best price. Your strategy should not be dependent on that. You should be building positions or trading appropriately to your scale. (Read: Buy and hold or trading at stop-loss prices, not market orders) Said another way: The big guns will likely beat you, and you over time with LOTS of trading may lose a few % but for most small fries it shouldn't even matter. That said, it looks like Robinhood is making more than most on their orderflow: > In September 2018, Logan Kane, a contributor to Seeking Alpha, stated that Robinhood's payment for order flow generated ten times the revenue as other brokers receive from market makers for the same volume. Bloomberg has analyzed Robinhood's reports to the Securities and Exchange Commission (SEC), and calculates that Robinhood generates almost half of its income from payment for order flow. https://www.investopedia.com/articles/active-trading/020515/how-robinhood-makes-money.asp https://www.investopedia.com/articles/active-trading/020515/...

cpwright 7y ago

The largest amount of revenue comes from the interest spread on cash balances that people have in their accounts.

Lazare 7y ago

Of course not. That's 1) deeply illegal and 2) wouldn't even be profitable. Edit: I love how I'm getting downvoted for stating the truth. Nothing gets people with no knowledge of financial markets as irrationally excited as HFT and payment for order flow.

tptacek 7y ago
I think you're pretty much completely on the right side of this and your other comments on this thread have been really strong, but this comment would be much stronger without the coda about downvoting, which (1) contravenes a guideline on the site and (2) really just invites spite voting.
- Lazare 7y ago
  Arg, good point. Unfortunately, it's too late to edit or delete the comment now. Shouldn't comment right before lunch; I get grumpy apparently. :(

Fomite 7y ago

They make most of their money from interest on parked cash (they also offer managed portfolios and the like, but I've never felt the need).

turk73 7y ago
Paypal's original patented business plan was to do this, too.