6 ms·

Index funds democratized investing. Robinhood “democratized” the worst part of investing and exposed unsophisticated investors to the instruments they are most

Index funds democratized investing. Robinhood “democratized” the worst part of investing and exposed unsophisticated investors to the instruments they are most likely to underperform on. Individual stock picking is probably worse than indexes but fine, however the incentive to day trade or trade complex derivatives is almost certainly going to hurt people far more often than a Vanguard account. It’s not a coincidence Robinhood has been directly linked to teen suicide and Vlad gave the proverbial lip service. In any case, it really doesn’t matter. It’s awful at order execution, so you get worst prices on things. This was proven but SEC just gave slap on wrist. Its an extremely immature platform and has outages at the worst times. It’s app is simple but missing key info compared to competitors. Finally, the GameStop fiasco was unforgivable and only a naive fool would accept the explanation given. Citadel is the MAJORITY of Robinhood revenue and was opposite that trade. The stock market has existed for over a century with online trading for decades, including many volatile stocks, and apologists can’t name a single other example of one way trade restrictions. It didn’t happen during the Volkswagen short squeeze. Despite that, apologists act like the clearing house explanation is stone cold fact. Source? Not a single investigation other than the word of Robinhood CEO, who contradicted himself multiple times explaining it. It was the fraud of the century and only people with little understanding of finance bought the explanation.

adabyron 5y ago
M1, E-Trade, Trading 212, Interactive Brokers, TD Ameritrade/Schwab and WeBull halted options as well.[1] There are a few more I'm missing. I wasn't happy about it but I don't blame them. As much as people were talking about over 100% of GME shorted, I can't imagine how much margin on top of margin people were trading while there options had yet to be settled. If anything the issue should be how long it takes a trade to settle. [1]https://markets.businessinsider.com/news/stocks/robinhood-webull-m1-reopen-gamestop-stock-trading-2021-1-1030019926 https://markets.businessinsider.com/news/stocks/robinhood-we...
- Judgmentality 5y ago
  > I wasn't happy about it but I don't blame them. What they did was illegal, so why not blame them? Robinhood is being investigated for it. Why not blame everyone that's guilty? https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood-ceos-phone-in-gamestop-trading-halt-investigation https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood...
  - gruez 5y ago
    > Robinhood is being investigated for it. Why not blame everyone that's guilty? Because being investigated means you're guilty? I guess a fair and impartial trial is just red tape.
    - Judgmentality 5y ago
      Okay, I think you're missing the point. What they did was illegal. Why would you not blame corporations for financial crimes? They stole money - I have no idea why you "wouldn't blame them" for that. Sure, if it turns out they didn't commit the crime don't blame them (but there is overwhelming evidence that I have personally witnessed so I already know for a fact that they did this). What I don't get is why this guy is apologizing for theft.
      - gruez 5y ago
        > What they did was illegal. Why would you not blame corporations for financial crimes? They stole money You think that what they did was illegal, but the person you initially replied to (https://news.ycombinator.com/user?id=adabyron https://news.ycombinator.com/user?id=adabyron) only said he "wasn't happy about it". That's not the same as "apologizing for theft". >but there is overwhelming evidence that I have personally witnessed so I already know for a fact that they did this do share.
        Judgmentality 5y ago
        He didn't just say he "wasn't happy about it," he also said "I don't blame them." You're right, it's not apologizing, but it's exoneration. I'm guessing you're aware of the trading halts in January and are arguing that's legal (or at least remain unconvinced it's illegal). Rather than have a long argument about whether or not brokers were legally entitled to restrict trading, I'll just concede as it really wasn't the point I wanted to make. I'm not a lawyer, there is nuance in the legal system, blah blah blah. I could go down the GME rabbit hole but nobody gives a shit. I think of it more like when a cop gets away with murder in our legal system. Did he commit a crime? Well, technically no, because our legal system said so - but I still feel comfortable calling him a criminal. Likewise, nobody in the US went to jail for the 2008 financial collapse, so I guess nobody committed any crimes. But that's me moving the goalposts, making appeals to emotions, and just generally making a very weasely argument. My frustration is with people so willfully absolving others of guilt. I feel like the way to make the world a better place is by holding people accountable for their actions, instead of just chant it as some bullshit mantra at another dumb tech startup that provides no real value to anyone. Obviously other people have different perspectives and may not have seen any wrongdoing in what happened. Everyone is entitled to their beliefs. And I'm allowed to think people are ignorant and morally bankrupt for the beliefs they hold. So you're right, but I don't care because that's not what matters.
- np_tedious 5y ago
  I don't know the exact situation with all of them, but at least Robinhood and WeBull both occurred due to reliance on Apex Clearinghouse
  - kasey_junk 5y ago
    https://blog.robinhood.com/news/2018/10/9/introducing-clearing-by-robinhood https://blog.robinhood.com/news/2018/10/9/introducing-cleari... Robinhood has been self clearing for years before the GME incident
    - gruez 5y ago
      Right, but that just means whatever problems that the clearinghouse was experiencing (they're not just doing it willy-nilly) is passed to robinhood directly.
      - np_tedious 5y ago
        Yeah, I should've said DTCC in robinhood case. Thanks for correcting me, GP. I should've remembered this from the tax statements changing
- itchyouch 5y ago
  Options are always automatically halted on the options exchanges when the underlying stock is halted. GME was constantly hitting volatility circuit breakers due to the large price moves during the squeeze. These institutions were limiting the quantity that users could purchase, not necessarily halting the options.
gruez 5y ago
>Source? Not a single investigation other than the word of Robinhood CEO I'd welcome an investigation, but based on the rest of your comment ("apologists", "only a naive fool would accept the explanation given") my guess is that your mind is already made up.
- meowface 5y ago
  Not to mention "it was the fraud of the century".
- ta1234567890 5y ago
  Looks like it might be happening. Robinhood’s CEO’s phone has been seized: https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood-ceos-phone-in-gamestop-trading-halt-investigation https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood...
  - ta1234567890 5y ago
    Why the downvotes? Just pointing out a fact, I’m not supporting any conspiracies. Here’s an excerpt from the linked article: > The company also said it is under investigation by a series of regulators, state attorneys general, the SEC, and the U.S. Department of Justice in proceedings associated with the trading restrictions; the company said its CEO Vladimir Tenev has also had his cell phone seized by federal attorneys.
yreg 5y ago
>It was the fraud of the century and only people with little understanding of finance bought the explanation A CFO of a multimilion dollar company gave me the same explanation independently before Robinhood gave any statement.
WYepQ4dNnG 5y ago
> Index funds democratized investing. Robinhood “democratized” the worst part of investing and exposed unsophisticated investors On the spot! Robinhood has made it so easy to trade that I have seen many people trading from their mobile while having a coffee or commuting! I would really like to see all these "traders" in 5/10 years ... if it is true that 80% of day traders loose money .. I bet tons of improvised traders will learn a very expensive lesson. I don't do trading, I simply don't have time to fully look into companies balance sheets etc. I buy index/mutual funds , I might have missed the meme stocks but I am happy with my steady growing investments, compounding effect works great!
- ses1984 5y ago
  Everyone feels like a genius in a bull market. A pile of bread mold could make money in the stock market now. It won't last forever though.
- jackson1442 5y ago
  I definitely fell into this trap, but fortunately came out ahead. After switching to Vanguard I feel more comfortable in my investments since I don't feel the time-pressure to check performance etc. RH feels too much like a social network where it's trying to push you to buy and sell every single day while more traditional brokerages follow a "set it and forget it" path.
  - fakedang 5y ago
    This is also what I've noticed, and it mirrors with investing mentality of their respective users too. Schwab, Fidelity and Vanguard (the 3 platforms I looked at before going with Schwab) gear their experience towards a long-term investing mentality. They'll do a large number of checks and forms until they'll let you perform certain trades (options, futures, derivatives, etc). You actually need to pass a few tests to do those. Meanwhile RH makes that as easy as slicing butter with a warm knife, and barely warns its users of the risks.
- nightski 5y ago
  I trade at the risk of lower overall returns for the chance of very high returns. Index funds are for my retirement account, it's fun to have a brokerage account and trade with it as a hobby. It's been very profitable so far but I don't expect that to continue. I'd imagine day trading has a much higher return than buying lottery tickets or gambling at a casino for example.
8note 5y ago
What do you mean when you say "democratized investing" ? That people can get benefits from the stock markets? Or that investment/economic decisions van be made democratically? Index funds rely on the the folks making the index to determine which stocks get bought -- who's on the s&P 500 is not a democratic process
- deleted 5y ago
  [deleted]
  - deleted 5y ago
    [deleted]
- missedthecue 5y ago
  Board members are voted for by stockholders
- bidirectional 5y ago
  No, the contents of an index fund like SPY are determined by the prevailing market conditions. You're confusing index funds with actively managed funds. The market is a weighted voting machine so index funds are at least somewhat democratic.
tptacek 5y ago
The problem with the conspiracy theory about Citadel forcing Robinhood to halt GME is that plenty of providers for whom Citadel wasn't most of their revenue also halted GME. There are other reasons this conspiracy is silly, but that fact seems to kill it pretty dead. I don't like Robinhood and don't feel any need to apologize for it; I think they're predatory. But this isn't why. "Fraud of the century" is pretty funny, though. Kudos.
- fakedang 5y ago
  Idk, Schwab,Vanguard and Fidelity still allowed us to trade GME.
- toomanybeersies 5y ago
  Even here in Australia, the trading platforms I use all restricted trading on GME. There's little chance that the Big Four banks in Australia were all part of a conspiracy to ripping off investors, at least in regards to GME (they're too busy ripping Aussies off via their superannuation).
teawrecks 5y ago
IMO if there ever existed an "American Dream" it was: the ability for an individual to work hard, assume a high amount of risk, get lucky, and reap the rewards. There was a time when that was possible in the US, but it hasn't been that way for a long time. It seems that in the 1900s the American Dream shifted to mean: get a job, buy a house, have kids, don't take risks, trust in the system and the system will support you. Now in 2021, it's more like: get a job to ensure you don't go bankrupt from stupid high healthcare expenses, your employer will keep all the profits and shift all the risks onto you, and if you're moderately lucky and live in the right place, you won't be homeless. I don't know how I feel about publicly traded stocks or the stock market, but I can't help but feel like "index funds democratized investing" is like saying "the 9 to 5 job democratized the American Dream".
starguide77 5y ago
When you say "It’s awful at order execution, so you get worst prices on things." What does "worst price" represent? How do you get a "Worst price" than anywhere else?
- dmoy 5y ago
  If you're willing to read a lot, this is a decent overview: https://www.stockbrokers.com/guides/order-execution https://www.stockbrokers.com/guides/order-execution Also here's the disclosure from IBKR, which is probably the polar opposite from robin hood in terms of favorable order execution https://gdcdyn.interactivebrokers.com/Universal/servlet/Registration_v2.formSampleView?formdb=3074 https://gdcdyn.interactivebrokers.com/Universal/servlet/Regi... I know the first link said fidelity is better, but that's fidelity vs ibkr-lite, not ibkr-pro.
- mister_pea 5y ago
  Robinhood sells to/executes orders through high frequency trading firms like Citadel and (I think) Two Sigma. Because Robinhood isn't connected directly to, say, the NYSE, these HFT firms essentially buy the security and sell it to you for a slightly higher price. TBF, other companies do this too; like, TD Ameritrade, Schwab and E*Trade.
  - carnitine 5y ago
    No, HFT firms are obliged to meet the NBBO. They improve prices for retail investors because retail investors are generally safer to transact with.
gjs278 5y ago
get over yourself. you are so uninformed it’s not even funny.
this_user 5y ago
> Finally, the GameStop fiasco was unforgivable and only a naive fool would accept the explanation given. Citadel is the MAJORITY of Robinhood revenue and was opposite that trade. Only someone who doesn't understand how any of this works would believe these absurd conspiracy theories. 1) Citadel is one of FIVE of wholesale market markets RH use. Even if they did refuse to accept orders for GME, why wouldn't their four main competitors not happily accept them if it meant blowing up the biggest player in the field? They have no incentive to help Citadel. In fact, they have a clear financial incentive to do the opposite. 2) Why would RH care if Citadel went away? Citadel is one of their five 'suppliers' if you will. If Citadel disappeared overnight, RH would just route their order to the others. It makes absolutely no difference to them. They just route to whoever currently pays the most for orderflow. 3) RH customers are extremely small players with next to no capital between them. Cutting them off makes no difference, because it was professionals with real money driving the squeeze at that point. They recognised that they could make a ton of money, and put a bunch of competitors out of business in the process, so they kept hammering the stock. 4) The claim that Citadel itself even had a GME short position (beyond their MM inventory) is baseless. Citadel Advisor's previous 13F filing shows that they were outright LONG GME stock, were LONG GME calls, and were LONG GME puts. So while those puts will have lost money, the other two positions will have GAINED MASSIVELY during the squeeze. Their short exposure was mainly via the money that they lent to Melvin Cap during the squeeze.
- jimmydorry 5y ago
  I'm not GP but you are missing the most important fact: a bit over 10% of Robinhood's base revenue was PFOF. Of that more than 10%, the top 3 (~75% of the total) paying them were Citadel, Susquehanna and Wolverine. Losing PFOF from Citadel alone means kissing away more than 5% of their _revenue_. With essentially no cost associated with PFOF, these payments account for a large portion of their profit.
  - loeg 5y ago
    They would just sell that order flow to the next highest bidder. It would be a marginal, not total, loss.
FabHK 5y ago
> It was the fraud of the century and only people with little understanding of finance bought the explanation. I think you'll find that the opposite is the case.
amoorthy 5y ago
This comment has a lot of merit. The expected value from day-trading or short-term investing by retail investors is likely negative. (I learned this during undergrad doing day trading for a few months and nearly losing my tuition. stupid). The reality is unless you have an algo trading system or are a long-term investor you are going to lose on day trading in the long run. RH has done a great job of making trading easier for the masses; I'm not sure the net outcome is a good one.
DelTaco 5y ago
While index funds were arguably a much much more important step, there were few funds you could invest in for less than $3,000 up until several years ago. And those that were less than $3,000 initial investment were around $1,000. A lot of folks can't afford that all at once.
- toomanybeersies 5y ago
  Given the expected gains (or losses), is it actually worth investing in equities if you have less than $3000 to invest? If you only have 3 grand to your name, you probably shouldn't be investing it. Personally, I've never invested less than $2000 in a single lot. I also aim to have around $5000 cash in my accounts, more than that is a waste, and less puts me at risk of being unable to pay for things.

adabyron 5y ago

M1, E-Trade, Trading 212, Interactive Brokers, TD Ameritrade/Schwab and WeBull halted options as well.[1] There are a few more I'm missing. I wasn't happy about it but I don't blame them. As much as people were talking about over 100% of GME shorted, I can't imagine how much margin on top of margin people were trading while there options had yet to be settled. If anything the issue should be how long it takes a trade to settle. [1]https://markets.businessinsider.com/news/stocks/robinhood-webull-m1-reopen-gamestop-stock-trading-2021-1-1030019926 https://markets.businessinsider.com/news/stocks/robinhood-we...

Judgmentality 5y ago
> I wasn't happy about it but I don't blame them. What they did was illegal, so why not blame them? Robinhood is being investigated for it. Why not blame everyone that's guilty? https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood-ceos-phone-in-gamestop-trading-halt-investigation https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood...
- gruez 5y ago
  > Robinhood is being investigated for it. Why not blame everyone that's guilty? Because being investigated means you're guilty? I guess a fair and impartial trial is just red tape.
  - Judgmentality 5y ago
    Okay, I think you're missing the point. What they did was illegal. Why would you not blame corporations for financial crimes? They stole money - I have no idea why you "wouldn't blame them" for that. Sure, if it turns out they didn't commit the crime don't blame them (but there is overwhelming evidence that I have personally witnessed so I already know for a fact that they did this). What I don't get is why this guy is apologizing for theft.
    - gruez 5y ago
      > What they did was illegal. Why would you not blame corporations for financial crimes? They stole money You think that what they did was illegal, but the person you initially replied to (https://news.ycombinator.com/user?id=adabyron https://news.ycombinator.com/user?id=adabyron) only said he "wasn't happy about it". That's not the same as "apologizing for theft". >but there is overwhelming evidence that I have personally witnessed so I already know for a fact that they did this do share.
      - Judgmentality 5y ago
        He didn't just say he "wasn't happy about it," he also said "I don't blame them." You're right, it's not apologizing, but it's exoneration. I'm guessing you're aware of the trading halts in January and are arguing that's legal (or at least remain unconvinced it's illegal). Rather than have a long argument about whether or not brokers were legally entitled to restrict trading, I'll just concede as it really wasn't the point I wanted to make. I'm not a lawyer, there is nuance in the legal system, blah blah blah. I could go down the GME rabbit hole but nobody gives a shit. I think of it more like when a cop gets away with murder in our legal system. Did he commit a crime? Well, technically no, because our legal system said so - but I still feel comfortable calling him a criminal. Likewise, nobody in the US went to jail for the 2008 financial collapse, so I guess nobody committed any crimes. But that's me moving the goalposts, making appeals to emotions, and just generally making a very weasely argument. My frustration is with people so willfully absolving others of guilt. I feel like the way to make the world a better place is by holding people accountable for their actions, instead of just chant it as some bullshit mantra at another dumb tech startup that provides no real value to anyone. Obviously other people have different perspectives and may not have seen any wrongdoing in what happened. Everyone is entitled to their beliefs. And I'm allowed to think people are ignorant and morally bankrupt for the beliefs they hold. So you're right, but I don't care because that's not what matters.
np_tedious 5y ago
I don't know the exact situation with all of them, but at least Robinhood and WeBull both occurred due to reliance on Apex Clearinghouse
- kasey_junk 5y ago
  https://blog.robinhood.com/news/2018/10/9/introducing-clearing-by-robinhood https://blog.robinhood.com/news/2018/10/9/introducing-cleari... Robinhood has been self clearing for years before the GME incident
  - gruez 5y ago
    Right, but that just means whatever problems that the clearinghouse was experiencing (they're not just doing it willy-nilly) is passed to robinhood directly.
    - np_tedious 5y ago
      Yeah, I should've said DTCC in robinhood case. Thanks for correcting me, GP. I should've remembered this from the tax statements changing
itchyouch 5y ago
Options are always automatically halted on the options exchanges when the underlying stock is halted. GME was constantly hitting volatility circuit breakers due to the large price moves during the squeeze. These institutions were limiting the quantity that users could purchase, not necessarily halting the options.

gruez 5y ago

>Source? Not a single investigation other than the word of Robinhood CEO I'd welcome an investigation, but based on the rest of your comment ("apologists", "only a naive fool would accept the explanation given") my guess is that your mind is already made up.

meowface 5y ago
Not to mention "it was the fraud of the century".
ta1234567890 5y ago
Looks like it might be happening. Robinhood’s CEO’s phone has been seized: https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood-ceos-phone-in-gamestop-trading-halt-investigation https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood...
- ta1234567890 5y ago
  Why the downvotes? Just pointing out a fact, I’m not supporting any conspiracies. Here’s an excerpt from the linked article: > The company also said it is under investigation by a series of regulators, state attorneys general, the SEC, and the U.S. Department of Justice in proceedings associated with the trading restrictions; the company said its CEO Vladimir Tenev has also had his cell phone seized by federal attorneys.

yreg 5y ago

>It was the fraud of the century and only people with little understanding of finance bought the explanation A CFO of a multimilion dollar company gave me the same explanation independently before Robinhood gave any statement.

WYepQ4dNnG 5y ago

> Index funds democratized investing. Robinhood “democratized” the worst part of investing and exposed unsophisticated investors On the spot! Robinhood has made it so easy to trade that I have seen many people trading from their mobile while having a coffee or commuting! I would really like to see all these "traders" in 5/10 years ... if it is true that 80% of day traders loose money .. I bet tons of improvised traders will learn a very expensive lesson. I don't do trading, I simply don't have time to fully look into companies balance sheets etc. I buy index/mutual funds , I might have missed the meme stocks but I am happy with my steady growing investments, compounding effect works great!

ses1984 5y ago
Everyone feels like a genius in a bull market. A pile of bread mold could make money in the stock market now. It won't last forever though.
jackson1442 5y ago
I definitely fell into this trap, but fortunately came out ahead. After switching to Vanguard I feel more comfortable in my investments since I don't feel the time-pressure to check performance etc. RH feels too much like a social network where it's trying to push you to buy and sell every single day while more traditional brokerages follow a "set it and forget it" path.
- fakedang 5y ago
  This is also what I've noticed, and it mirrors with investing mentality of their respective users too. Schwab, Fidelity and Vanguard (the 3 platforms I looked at before going with Schwab) gear their experience towards a long-term investing mentality. They'll do a large number of checks and forms until they'll let you perform certain trades (options, futures, derivatives, etc). You actually need to pass a few tests to do those. Meanwhile RH makes that as easy as slicing butter with a warm knife, and barely warns its users of the risks.
nightski 5y ago
I trade at the risk of lower overall returns for the chance of very high returns. Index funds are for my retirement account, it's fun to have a brokerage account and trade with it as a hobby. It's been very profitable so far but I don't expect that to continue. I'd imagine day trading has a much higher return than buying lottery tickets or gambling at a casino for example.

8note 5y ago

What do you mean when you say "democratized investing" ? That people can get benefits from the stock markets? Or that investment/economic decisions van be made democratically? Index funds rely on the the folks making the index to determine which stocks get bought -- who's on the s&P 500 is not a democratic process

deleted 5y ago
[deleted]
- deleted 5y ago
  [deleted]
missedthecue 5y ago
Board members are voted for by stockholders
bidirectional 5y ago
No, the contents of an index fund like SPY are determined by the prevailing market conditions. You're confusing index funds with actively managed funds. The market is a weighted voting machine so index funds are at least somewhat democratic.

tptacek 5y ago

The problem with the conspiracy theory about Citadel forcing Robinhood to halt GME is that plenty of providers for whom Citadel wasn't most of their revenue also halted GME. There are other reasons this conspiracy is silly, but that fact seems to kill it pretty dead. I don't like Robinhood and don't feel any need to apologize for it; I think they're predatory. But this isn't why. "Fraud of the century" is pretty funny, though. Kudos.

fakedang 5y ago
Idk, Schwab,Vanguard and Fidelity still allowed us to trade GME.
toomanybeersies 5y ago
Even here in Australia, the trading platforms I use all restricted trading on GME. There's little chance that the Big Four banks in Australia were all part of a conspiracy to ripping off investors, at least in regards to GME (they're too busy ripping Aussies off via their superannuation).

teawrecks 5y ago

IMO if there ever existed an "American Dream" it was: the ability for an individual to work hard, assume a high amount of risk, get lucky, and reap the rewards. There was a time when that was possible in the US, but it hasn't been that way for a long time. It seems that in the 1900s the American Dream shifted to mean: get a job, buy a house, have kids, don't take risks, trust in the system and the system will support you. Now in 2021, it's more like: get a job to ensure you don't go bankrupt from stupid high healthcare expenses, your employer will keep all the profits and shift all the risks onto you, and if you're moderately lucky and live in the right place, you won't be homeless. I don't know how I feel about publicly traded stocks or the stock market, but I can't help but feel like "index funds democratized investing" is like saying "the 9 to 5 job democratized the American Dream".

starguide77 5y ago

When you say "It’s awful at order execution, so you get worst prices on things." What does "worst price" represent? How do you get a "Worst price" than anywhere else?

dmoy 5y ago
If you're willing to read a lot, this is a decent overview: https://www.stockbrokers.com/guides/order-execution https://www.stockbrokers.com/guides/order-execution Also here's the disclosure from IBKR, which is probably the polar opposite from robin hood in terms of favorable order execution https://gdcdyn.interactivebrokers.com/Universal/servlet/Registration_v2.formSampleView?formdb=3074 https://gdcdyn.interactivebrokers.com/Universal/servlet/Regi... I know the first link said fidelity is better, but that's fidelity vs ibkr-lite, not ibkr-pro.
mister_pea 5y ago
Robinhood sells to/executes orders through high frequency trading firms like Citadel and (I think) Two Sigma. Because Robinhood isn't connected directly to, say, the NYSE, these HFT firms essentially buy the security and sell it to you for a slightly higher price. TBF, other companies do this too; like, TD Ameritrade, Schwab and E*Trade.
- carnitine 5y ago
  No, HFT firms are obliged to meet the NBBO. They improve prices for retail investors because retail investors are generally safer to transact with.

gjs278 5y ago

get over yourself. you are so uninformed it’s not even funny.

this_user 5y ago

> Finally, the GameStop fiasco was unforgivable and only a naive fool would accept the explanation given. Citadel is the MAJORITY of Robinhood revenue and was opposite that trade. Only someone who doesn't understand how any of this works would believe these absurd conspiracy theories. 1) Citadel is one of FIVE of wholesale market markets RH use. Even if they did refuse to accept orders for GME, why wouldn't their four main competitors not happily accept them if it meant blowing up the biggest player in the field? They have no incentive to help Citadel. In fact, they have a clear financial incentive to do the opposite. 2) Why would RH care if Citadel went away? Citadel is one of their five 'suppliers' if you will. If Citadel disappeared overnight, RH would just route their order to the others. It makes absolutely no difference to them. They just route to whoever currently pays the most for orderflow. 3) RH customers are extremely small players with next to no capital between them. Cutting them off makes no difference, because it was professionals with real money driving the squeeze at that point. They recognised that they could make a ton of money, and put a bunch of competitors out of business in the process, so they kept hammering the stock. 4) The claim that Citadel itself even had a GME short position (beyond their MM inventory) is baseless. Citadel Advisor's previous 13F filing shows that they were outright LONG GME stock, were LONG GME calls, and were LONG GME puts. So while those puts will have lost money, the other two positions will have GAINED MASSIVELY during the squeeze. Their short exposure was mainly via the money that they lent to Melvin Cap during the squeeze.

jimmydorry 5y ago
I'm not GP but you are missing the most important fact: a bit over 10% of Robinhood's base revenue was PFOF. Of that more than 10%, the top 3 (~75% of the total) paying them were Citadel, Susquehanna and Wolverine. Losing PFOF from Citadel alone means kissing away more than 5% of their _revenue_. With essentially no cost associated with PFOF, these payments account for a large portion of their profit.
- loeg 5y ago
  They would just sell that order flow to the next highest bidder. It would be a marginal, not total, loss.

FabHK 5y ago

> It was the fraud of the century and only people with little understanding of finance bought the explanation. I think you'll find that the opposite is the case.

amoorthy 5y ago

This comment has a lot of merit. The expected value from day-trading or short-term investing by retail investors is likely negative. (I learned this during undergrad doing day trading for a few months and nearly losing my tuition. stupid). The reality is unless you have an algo trading system or are a long-term investor you are going to lose on day trading in the long run. RH has done a great job of making trading easier for the masses; I'm not sure the net outcome is a good one.

DelTaco 5y ago

While index funds were arguably a much much more important step, there were few funds you could invest in for less than $3,000 up until several years ago. And those that were less than $3,000 initial investment were around $1,000. A lot of folks can't afford that all at once.

toomanybeersies 5y ago
Given the expected gains (or losses), is it actually worth investing in equities if you have less than $3000 to invest? If you only have 3 grand to your name, you probably shouldn't be investing it. Personally, I've never invested less than $2000 in a single lot. I also aim to have around $5000 cash in my accounts, more than that is a waste, and less puts me at risk of being unable to pay for things.