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RobinHood is NOT free: https://www.wsj.com/articles/why-free-trading-on-robinhood-isnt-really-free-1541772001 https://www.wsj.com/articles/why-free-trading-on-

RobinHood is NOT free: https://www.wsj.com/articles/why-free-trading-on-robinhood-isnt-really-free-1541772001 https://www.wsj.com/articles/why-free-trading-on-robinhood-i...

basch 6y ago
Commission free. Every broker takes something for order flow, some more than others.
pathseeker 6y ago
Companies pay for retail order flow because retail is dumb; and, on average, is not going to have trades better than random noise. This is ideal for market makers so market makers pay for it and even offer better spreads to retail. Market makers don't want to be on the other side of "smart money" trades. tl;dr you're not getting screwed by Robinhood selling your order flow, you're getting a benefit.
usmannk 6y ago
I recommend ignoring this misinformed WSJ article and reading this: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone... After that come back and see how the WSJ article is just a poorly written hit piece on RH.
- KKKKkkkk1 6y ago
  > After that come back and see how the WSJ article is just a poorly written hit piece on RH. So I read Patrick's article and now I'm back. You're wrong. Both articles are saying that Robinhood makes much more money from order flow than other brokerages. The WSJ is saying that this is because Robinhood takes the market makers' price improvements to itself instead of passing it on to their clients. Patrick is saying that Robinhood makes more money off of order flow because options trading (which Robinhood does a lot of) is much more profitable for the market makers. Now both hypotheses might be true. Robinhood could be offering their clients worse prices and at the same time get paid more by the market makers because of lots of options trading. I don't see anything in Patrick's article that contradicts the WSJ's explanation. And given the following quote, I think the WSJ's analysis is pretty convincing: One executive with a high-speed trading firm that executes orders for Robinhood said its price improvement is much worse than that of competing brokers.
belltaco 6y ago
Is there a way to monetize your order flow?

RobinHood is NOT free: https://www.wsj.com/articles/why-free-trading-on-robinhood-isnt-really-free-1541772001 https://www.wsj.com/articles/why-free-trading-on-robinhood-i...

basch 6y ago

Commission free. Every broker takes something for order flow, some more than others.

pathseeker 6y ago

Companies pay for retail order flow because retail is dumb; and, on average, is not going to have trades better than random noise. This is ideal for market makers so market makers pay for it and even offer better spreads to retail. Market makers don't want to be on the other side of "smart money" trades. tl;dr you're not getting screwed by Robinhood selling your order flow, you're getting a benefit.

usmannk 6y ago

I recommend ignoring this misinformed WSJ article and reading this: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone... After that come back and see how the WSJ article is just a poorly written hit piece on RH.

KKKKkkkk1 6y ago
> After that come back and see how the WSJ article is just a poorly written hit piece on RH. So I read Patrick's article and now I'm back. You're wrong. Both articles are saying that Robinhood makes much more money from order flow than other brokerages. The WSJ is saying that this is because Robinhood takes the market makers' price improvements to itself instead of passing it on to their clients. Patrick is saying that Robinhood makes more money off of order flow because options trading (which Robinhood does a lot of) is much more profitable for the market makers. Now both hypotheses might be true. Robinhood could be offering their clients worse prices and at the same time get paid more by the market makers because of lots of options trading. I don't see anything in Patrick's article that contradicts the WSJ's explanation. And given the following quote, I think the WSJ's analysis is pretty convincing: One executive with a high-speed trading firm that executes orders for Robinhood said its price improvement is much worse than that of competing brokers.

belltaco 6y ago

Is there a way to monetize your order flow?