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Practically no one was harmed by this. A penny or two per trade. It’s more the principle of the matter than the actual costs. The fact that Robinhood was clearl

by cwhiz 6y ago

Practically no one was harmed by this. A penny or two per trade. It’s more the principle of the matter than the actual costs. The fact that Robinhood was clearly lying is the most concerning thing.

alwayseasy 6y ago
SEC doesn't look at direct investor harm to litigate so you won't find them trying to build such a case either. They want a fair market that's about it.
frockington1 6y ago
Agreed. Its even worse as it fits into their entire business model to capture young unsophisticated investors. An experienced investor would make one trade and notice the order execution was off, however when you specifically target an inexperienced investor its easier to get away with the con
- IfOnlyYouKnew 6y ago
  An "experienced investor" would neither care nor, most likely, notice anything about this. Mostly because "experienced investors" aren't in the business of day trading. But also because nothing was "off" here. It isn't the Robinhood customer that is harmed by this, but institutional investors who, by this mechanisms, are excluded from the services of these market makers because they present a different risk profile.
- kasey_junk 6y ago
  I worked in HFT building trading platforms and it would be virtually impossible for me to see order execution being off using retail tooling. In fact it takes incredibly sophisticated infrastructure to do it. The kind of infrastructure you build if you are a market maker who would like to pay for order flow. Even the SEC doesn’t have the capabilities to check execution rates for every order. They rely on audits of smaller subsets of the orders in historical reports.
IshKebab 6y ago
I agree. I used Freetrade and they delay all free trades until 3pm the next day. Obviously they are doing some nonsense to make a tiny bit of money from that, but it doesn't really matter to me any more than the 0.5% duty does because I'm not idiotic enough to make short-term trades. Just put the money in, forget about it and take it out years later. 0.5% will be irrelevant.
Triv888 6y ago
noone will see the money from the fine anyways
- tuskan 6y ago
  I wonder if Robinhood just got a -34 million tax credit. Almost similar to putting money into your IRA for the normal taxpayer.
nlh 6y ago
Exactly. The people who were "harmed" by this were folks who tried to use Robinhood to do ultra-short-term (seconds-level) trading in an attempt to capture micro-swings, and Robinhood is a terrible platform to do that (and, honestly, people who thought Robinhood was a good platform to do that kinda deserve what they got ;) For normal investors / traders / gamblers, this shouldn't make a difference. The reality is that most micro-swings in a stock are indistinguishable from random noise, so if a price "should" have been $10.05 and you paid $10.07 on Robinhood, it's just as likely that 5 seconds later you're at $10.03 as you are $10.11. So....shrug
kube-system 6y ago
Their whole model reminds me of this: https://www.youtube.com/watch?v=yZjCQ3T5yXo https://www.youtube.com/watch?v=yZjCQ3T5yXo
gnopgnip 6y ago
> certain Robinhood orders lost a total of approximately $34.1 million in price improvement compared to the price improvement they would have received had they been placed at competing retail broker-dealers, even after netting the approximately $5 per-order commission costs those broker-dealers were charging at the time. https://www.sec.gov/litigation/admin/2020/33-10906.pdf https://www.sec.gov/litigation/admin/2020/33-10906.pdf

by cwhiz 6y ago

Practically no one was harmed by this. A penny or two per trade. It’s more the principle of the matter than the actual costs. The fact that Robinhood was clearly lying is the most concerning thing.

alwayseasy 6y ago

SEC doesn't look at direct investor harm to litigate so you won't find them trying to build such a case either. They want a fair market that's about it.

frockington1 6y ago

Agreed. Its even worse as it fits into their entire business model to capture young unsophisticated investors. An experienced investor would make one trade and notice the order execution was off, however when you specifically target an inexperienced investor its easier to get away with the con

IfOnlyYouKnew 6y ago
An "experienced investor" would neither care nor, most likely, notice anything about this. Mostly because "experienced investors" aren't in the business of day trading. But also because nothing was "off" here. It isn't the Robinhood customer that is harmed by this, but institutional investors who, by this mechanisms, are excluded from the services of these market makers because they present a different risk profile.
kasey_junk 6y ago
I worked in HFT building trading platforms and it would be virtually impossible for me to see order execution being off using retail tooling. In fact it takes incredibly sophisticated infrastructure to do it. The kind of infrastructure you build if you are a market maker who would like to pay for order flow. Even the SEC doesn’t have the capabilities to check execution rates for every order. They rely on audits of smaller subsets of the orders in historical reports.

IshKebab 6y ago

I agree. I used Freetrade and they delay all free trades until 3pm the next day. Obviously they are doing some nonsense to make a tiny bit of money from that, but it doesn't really matter to me any more than the 0.5% duty does because I'm not idiotic enough to make short-term trades. Just put the money in, forget about it and take it out years later. 0.5% will be irrelevant.

Triv888 6y ago

noone will see the money from the fine anyways

tuskan 6y ago
I wonder if Robinhood just got a -34 million tax credit. Almost similar to putting money into your IRA for the normal taxpayer.

nlh 6y ago

Exactly. The people who were "harmed" by this were folks who tried to use Robinhood to do ultra-short-term (seconds-level) trading in an attempt to capture micro-swings, and Robinhood is a terrible platform to do that (and, honestly, people who thought Robinhood was a good platform to do that kinda deserve what they got ;) For normal investors / traders / gamblers, this shouldn't make a difference. The reality is that most micro-swings in a stock are indistinguishable from random noise, so if a price "should" have been $10.05 and you paid $10.07 on Robinhood, it's just as likely that 5 seconds later you're at $10.03 as you are $10.11. So....shrug

kube-system 6y ago

Their whole model reminds me of this: https://www.youtube.com/watch?v=yZjCQ3T5yXo https://www.youtube.com/watch?v=yZjCQ3T5yXo

gnopgnip 6y ago

> certain Robinhood orders lost a total of approximately $34.1 million in price improvement compared to the price improvement they would have received had they been placed at competing retail broker-dealers, even after netting the approximately $5 per-order commission costs those broker-dealers were charging at the time. https://www.sec.gov/litigation/admin/2020/33-10906.pdf https://www.sec.gov/litigation/admin/2020/33-10906.pdf