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Hard to hear. Robinhood has normalized pay for flow, a service that is literally shaving cash off each order in exchange for “free trading”. Pff can only gener

Hard to hear. Robinhood has normalized pay for flow, a service that is literally shaving cash off each order in exchange for “free trading”. Pff can only generate net revenue by making traders pay more per trade than actual best execution, which Robinhood is suppose to be legally required to deliver. The SEC in the 90s and 2000s thought the practice amounted to middle manning traders and should be illegal. Basically: Robinhood gives stock purchases to a third party, who pays Robinhood for each transaction in “rebates”. If you have a free trading account other than fidelity, you are paying insane transaction fees that are hidden from you by the pff. It’s middle manning, and Robinhood is paid to enable it. Not a fall guy, just not all the guys that need to fall.

croon 6y ago
Isn't the not-so-secret secret that every other brokerage also sells flow [0], but still charges the end user? Making Robinhood just less bad than the rest. [0] https://piper2.bluematrix.com/sellside/EmailDocViewer?encrypt=6470f5cc-e225-497c-922d-e00e6188ed78&mime=pdf&co=Piper&id=FSG-ER@psc.com&source=mail https://piper2.bluematrix.com/sellside/EmailDocViewer?encryp...
omgJustTest 6y ago
On the topic of trading freezes and capital requirements: there are a lot of ppl who will loan a broker money. Intersect them with the number of ppl who will and can PFF and now you are talking about 1-10orgs and most of them are high frequency middle manning the orders coming in. If you are one of the 1-10 orgs who do this 1. You’re scum and 2. You are big enough to be on both sides of this definition of the conflict of interests What happens to RH rebates if they no longer have 1-10 of those PFF customers?
astura 6y ago
Isn't this something almost all brokerages do? https://efipm.medium.com/zero-commission-brokers-selling-order-flow-are-the-new-intermediaries-who-will-disrupt-them-5e79628b32f1 https://efipm.medium.com/zero-commission-brokers-selling-ord...
mlrtime 6y ago
When RH sells to a internalizer for payment (PFOF) it is always inside the NBBO (National Best Bid and Offer) which is always going to be a better price than what you would receive on a public exchange AND there are 0 commissions.
- rcxdude 6y ago
  Exactly. It's not the user paying for it, it's whoever would have been on the other side of the trade without the pay-for-flow.
  - pests 6y ago
    Right, because that other side of the trade is purposefully trading against this bought flow thinking they can earn more opposed to competing with institutionalized investors.

croon 6y ago

Isn't the not-so-secret secret that every other brokerage also sells flow [0], but still charges the end user? Making Robinhood just less bad than the rest. [0] https://piper2.bluematrix.com/sellside/EmailDocViewer?encrypt=6470f5cc-e225-497c-922d-e00e6188ed78&mime=pdf&co=Piper&id=FSG-ER@psc.com&source=mail https://piper2.bluematrix.com/sellside/EmailDocViewer?encryp...

omgJustTest 6y ago

On the topic of trading freezes and capital requirements: there are a lot of ppl who will loan a broker money. Intersect them with the number of ppl who will and can PFF and now you are talking about 1-10orgs and most of them are high frequency middle manning the orders coming in. If you are one of the 1-10 orgs who do this 1. You’re scum and 2. You are big enough to be on both sides of this definition of the conflict of interests What happens to RH rebates if they no longer have 1-10 of those PFF customers?

astura 6y ago

Isn't this something almost all brokerages do? https://efipm.medium.com/zero-commission-brokers-selling-order-flow-are-the-new-intermediaries-who-will-disrupt-them-5e79628b32f1 https://efipm.medium.com/zero-commission-brokers-selling-ord...

mlrtime 6y ago

When RH sells to a internalizer for payment (PFOF) it is always inside the NBBO (National Best Bid and Offer) which is always going to be a better price than what you would receive on a public exchange AND there are 0 commissions.

rcxdude 6y ago
Exactly. It's not the user paying for it, it's whoever would have been on the other side of the trade without the pay-for-flow.
- pests 6y ago
  Right, because that other side of the trade is purposefully trading against this bought flow thinking they can earn more opposed to competing with institutionalized investors.