4 ms·

> to another firm that can front run it. to be legal, the broker selling your order flow must give the price you're supposed to have gotten to be at or lower

by chii 2y ago

> to another firm that can front run it. to be legal, the broker selling your order flow must give the price you're supposed to have gotten to be at or lower than the best price from the market. I dont get how front running could work under this legal rule.

nairboon 2y ago
OP just provided an explanation for Robin Hood's business model, it was never stated that Robin Hood operates in accordance with the law. In fact it is well known, that Robin Hood operated illegally for a long time and got fined by the SEC for its violations: https://www.sec.gov/newsroom/press-releases/2025-5 https://www.sec.gov/newsroom/press-releases/2025-5
- chii 2y ago
  None of those violations are related to trade order flow. The majority are related to customer protections, lack of data retention etc. With perhaps the violations related to the blue sheet data (transaction data), which is used by various financial regulators to sniff out illicit transactions. Robinhood's been accused of selling out their retail customer by allowing HFT firms to frontrun retail trade. And yet, no evidence of such actions have been found so far.
  - lucianbr 2y ago
    The fact that violations happened is clear proof that violations can happen. You asked how RH could do front running when it's illegal - the same way they could and did violate customer protections when it is illegal.
    - seabird 2y ago
      Whether or not Robinhood could do it isn't the right question. The better question is whether or not it would make sense for Robinhood or any other actor to front run microscopic retail trades. Do you understand how front running helps the front runner and hurts the large volume trader? I think if you did, you would realize that Robinhood has no reason to do it.
matthewdgreen 2y ago
Each time I hear this I am reminded of the signs that appear the inside of hotel room doors in some places, advertising insanely high prices for the room. I believe these stem from laws that require the hotel to offer the room at or lower than the price advertised on the sign, so the hotels jack that price up to something unrelated to the actual price you'd get from competitive shopping. I assume this can't happen with open market prices, right?
chipsrafferty 2y ago
People do illegal things all the time, especially in finance. If the penalty is less than the profit, everyone does crime.

by chii 2y ago

nairboon 2y ago

OP just provided an explanation for Robin Hood's business model, it was never stated that Robin Hood operates in accordance with the law. In fact it is well known, that Robin Hood operated illegally for a long time and got fined by the SEC for its violations: https://www.sec.gov/newsroom/press-releases/2025-5 https://www.sec.gov/newsroom/press-releases/2025-5

chii 2y ago
None of those violations are related to trade order flow. The majority are related to customer protections, lack of data retention etc. With perhaps the violations related to the blue sheet data (transaction data), which is used by various financial regulators to sniff out illicit transactions. Robinhood's been accused of selling out their retail customer by allowing HFT firms to frontrun retail trade. And yet, no evidence of such actions have been found so far.
- lucianbr 2y ago
  The fact that violations happened is clear proof that violations can happen. You asked how RH could do front running when it's illegal - the same way they could and did violate customer protections when it is illegal.
  - seabird 2y ago
    Whether or not Robinhood could do it isn't the right question. The better question is whether or not it would make sense for Robinhood or any other actor to front run microscopic retail trades. Do you understand how front running helps the front runner and hurts the large volume trader? I think if you did, you would realize that Robinhood has no reason to do it.

matthewdgreen 2y ago

Each time I hear this I am reminded of the signs that appear the inside of hotel room doors in some places, advertising insanely high prices for the room. I believe these stem from laws that require the hotel to offer the room at or lower than the price advertised on the sign, so the hotels jack that price up to something unrelated to the actual price you'd get from competitive shopping. I assume this can't happen with open market prices, right?

chipsrafferty 2y ago

People do illegal things all the time, especially in finance. If the penalty is less than the profit, everyone does crime.