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Well sure PFOF alone is not that much of a competitive gain, though it will put you above most investors to have it that is why hedge funds like Citadel, Virtu,

Well sure PFOF alone is not that much of a competitive gain, though it will put you above most investors to have it that is why hedge funds like Citadel, Virtu, and Wolverine buy this info. Those guys are doing things with that data for sure because Robinhood has scale/volume in lower skilled investors. It isn't cheap, funds has to have a massive cash to even afford the data. Robinhood has PFOF AND low skill investors in volume, so the amount of prediction of moves is a combination of data and their users. They also recommend stocks and market these to users that are less skilled, this is in unison with online forums like wallstreetbets and more. Robinhood can move the market on stocks they want and compare volume/direction they are pushing and predict the volume/direction from others with that. Robinhood's name seems small fish, but they are a whale that other whales feed off of and those whales bring schools of small fish in uniform to them to play off of and eat. Robinhood buyers/partners make moves based on all of those data points and the result is almost like stealing candy from kids. This is especially true on stocks they themselves push/recommend or are pushing funding to, partner companies or companies also funded by who funded them. It seems like "democratic" markets but is actually so choreographed it is a more authoritarian/fixed market due to the sheer volume and type of investor. Since Robinhood only sells data, and so many competitors are popping up, it has to be massively lucrative in more ways than just the first step, but supporting deeper investments is probably a key aspect of the plan.

tptacek 6y ago
I don't know how to respond to this comment, since it's orthogonal to my understanding of PFOF (and for that matter the understanding of people like Matt Levine). Market makers don't buy retail order flow to get an edge over retail investors. They seek it out because it's safer to trade with --- retail investors, unlike hedge funds, tend not to follow up their 100-share orders with huge numbers of subsequent hundred-share orders. Safer means cheaper. Market makers chop up the cost savings with brokerages, which is where the payment comes from. What rings true to me --- for whatever that's worth to you --- is that Robinhood influences its user behavior in ways that are bad for its users and generally good for the firms who execute its trades. Of course, that's true of anything that gets users trading more, which, of course, is something users should not be doing. Robinhood is bad! It's just not bad due the conspiracy theory Taibbi invokes. What's frustrating is that he's been saying this for awhile, and he's had plenty of time to investigate and build some understanding of how the market is structured. Matt Levine can explain it, entertainingly, to a lay person in just a paragraph or two. Taibbi simply doesn't care, and counts on you not caring either.
- drawkbox 6y ago
  Yeah that was a bit orthogonal but was going into the point that Robinhood is more than just payment order flow selling. Robinhood payment order flow selling (PFOF) is just the "limited hangout" they want people to focus on and how they make most of their money. I wouldn't doubt they even pay people and have false opposition to focus on the PFOF aspect over other things they are doing. Robinhood use PFOF more effectively than other retail brokerages with the larger system they are in. The type of investor can more easily be manipulated as well as the volume is key. However, PFOF is merely a node in the Robinhood system of influence. Ultimately Robinhood itself is a node in a orchestrated investment system that is greater than Robinhood. Anyone in investment or even knows a bit about geopolitics knows that it is greater than simply an app that sells PFOF. Robinhood would love people to just focus on PFOF because "everyone is doing that", but they aren't going further but Robinhood is.
cwyers 6y ago
They're not buying the info. The info is worthless. What they're buying is the deal flow.

tptacek 6y ago

I don't know how to respond to this comment, since it's orthogonal to my understanding of PFOF (and for that matter the understanding of people like Matt Levine). Market makers don't buy retail order flow to get an edge over retail investors. They seek it out because it's safer to trade with --- retail investors, unlike hedge funds, tend not to follow up their 100-share orders with huge numbers of subsequent hundred-share orders. Safer means cheaper. Market makers chop up the cost savings with brokerages, which is where the payment comes from. What rings true to me --- for whatever that's worth to you --- is that Robinhood influences its user behavior in ways that are bad for its users and generally good for the firms who execute its trades. Of course, that's true of anything that gets users trading more, which, of course, is something users should not be doing. Robinhood is bad! It's just not bad due the conspiracy theory Taibbi invokes. What's frustrating is that he's been saying this for awhile, and he's had plenty of time to investigate and build some understanding of how the market is structured. Matt Levine can explain it, entertainingly, to a lay person in just a paragraph or two. Taibbi simply doesn't care, and counts on you not caring either.

drawkbox 6y ago
Yeah that was a bit orthogonal but was going into the point that Robinhood is more than just payment order flow selling. Robinhood payment order flow selling (PFOF) is just the "limited hangout" they want people to focus on and how they make most of their money. I wouldn't doubt they even pay people and have false opposition to focus on the PFOF aspect over other things they are doing. Robinhood use PFOF more effectively than other retail brokerages with the larger system they are in. The type of investor can more easily be manipulated as well as the volume is key. However, PFOF is merely a node in the Robinhood system of influence. Ultimately Robinhood itself is a node in a orchestrated investment system that is greater than Robinhood. Anyone in investment or even knows a bit about geopolitics knows that it is greater than simply an app that sells PFOF. Robinhood would love people to just focus on PFOF because "everyone is doing that", but they aren't going further but Robinhood is.

cwyers 6y ago

They're not buying the info. The info is worthless. What they're buying is the deal flow.