3 ms·

Matt Levine claims that payment for order flow still benefits the retail trader: https://www.bloomberg.com/opinion/articles/2018-10-16/carl-icahn-wants-to-fight

• btilly 6y ago
  I'm not willing to pay Bloomberg to read that. But on a reasonable assumption what he is arguing is that the competition in the marketplace means that they are paying competitive prices for that order flow. They are making money but not much considering what they are doing. And it is massively better than what used to exist. I know this and agree with it. But as I said above, "The fact that it is better than what existed before doesn't change the fact that we can do better yet." The first point is that Robinhood is the one that they negotiate with. So the extra profits go there, and not directly to consumers. Secondly the HFT middlemen are still playing market makers, which means that they still are being paid for. There are cheaper ways to make a market work than HFT, and I outlined one above. Third, automated algorithms as market makers have the potential for some pretty dramatic events - such as the flash crash. Alternatives can avoid that.