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I don't think I understand what's wrong with this model. If I wanted to actively trade, I'd still prefer Robinhood's zero commission model, even if it meant tha
by nkohari 6y ago
I don't think I understand what's wrong with this model. If I wanted to actively trade, I'd still prefer Robinhood's zero commission model, even if it meant that my buy price was slightly higher. $10 a trade vs. pennies? Sign me up, we both win. What am I missing?
- _lazlo 6y agoI was looking to see if anyone caught this. It seems that Robinhood would be better for someone not investing a lot of money. If I execute a trade for $1,000,000 a small difference in stock price makes a difference and its better to pay a straight $5.00 commission with the lowest price possible. However, if I buy a single share for $50, that $5 commission is now substantial. This seems like a very clever way to compete and offer a better service to poorer people. Unless I'm missing something the boomer either didn't catch that, or chose not to acknowledge it. As a millennial I'll assume his best intentions and that this isn't an attack on a successful company business model that he's receiving a kickback for to de-legitimizing Robinhood.
- greenshackle2 6y agoThere is nothing wrong with the Payment For Order Flow model. Virtually every retail broker does it. What you're missing is that Robinhood is not the only commission-free brokerage. I'm sure you'd rather have no commissions and 80% of the price improvement instead of no commissions and 20% of the price improvement. The real problem is that Robinhood advertised they have THE BEST EXECUTION compared to other brokers, set up a Committee to ensure they have THE BEST EXECUTION, and then that Committee somehow failed to notice that Robinhood clearly doesn't have THE BEST EXECUTION because they're taking an 80% cut of price improvement, instead of 20% like everyone else.