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Payment for order flow trade never helps the consumer. RH accepted unusually large amounts of it. They harmed the consumers to the tune of $34m relative to norm
by bagacrap 6y ago
Payment for order flow trade never helps the consumer. RH accepted unusually large amounts of it. They harmed the consumers to the tune of $34m relative to normal practices. They lied about what they were doing.
- Kranar 6y agoThis is incorrect. The benefit of order flow to the consumer is additional sources of liquidity. If a consumer submits an order to buy 500 shares of AAPL for $100, there may only be 100 shares available on the public market at that price in which case the price of AAPL will increase from $100 to at a minimum $100.01. The way pay for flow works is that firms can execute against that order agreeing to fill any portion of it up to and including the full 500 shares. Furthermore by agreeing to pay for flow, it's a criminal offense for my firm to use that information to front run the order by buying it on the open market without first executing against the client. The allegation made by the SEC against Robinhood is that some kind of indirect front running was performed and perhaps even facilitated by Robinhood. The problem is that the SEC is pretty weak overall, and if their allegation is true then Robinhood should be punished much more severely than this $65M fine given that Robinhood and others likely profited at a minimum some $40M dollars.
- _cs2017_ 6y agoThe quality of comments in this thread is atrocious. I wonder what makes so many presumably technically trained people, to make confident claims about topics on which they very clearly have no bloody clue.
- smabie 6y agopayment for order flow helps the consumer a lot. By separating toxic from non-toxic order flows, retail traders get much better price improvements than institutional traders.