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Hmm, I'm assuming this is illegal (otherwise someone would likely be doing it) but why doesn't a high frequency trading firm make a competing application and just keep that order flow for themselves? Why not vertically integrate?
Hmm, I'm assuming this is illegal (otherwise someone would likely be doing it) but why doesn't a high frequency trading firm make a competing application and just keep that order flow for themselves? Why not vertically integrate?
Because retail sucks & their core competencies have nothing to do with dealing with customers.
Hmm, I'm assuming this is illegal (otherwise someone would likely be doing it) but why doesn't a high frequency trading firm make a competing application and just keep that order flow for themselves? Why not vertically integrate?
https://www.bloomberg.com/news/articles/2013-10-23/e-trade-s...
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Because retail sucks & their core competencies have nothing to do with dealing with customers.
Seriously you'd think on a board ostensibly obsessed with CAC and ARPU metrics, it would be immediately obvious why a specialty player wouldn't want to compete with Schwab and Fidelity.
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Interactive Brokers does not sell your order flow
Yea....Timber Hill is owned by Thomas Petterffy, founder of Interactive Brokers, and handles much of the options order flow from IB users. So...IB may not be making money off those trades, but the founder is still profiting from them. Don't get me wrong, as someone who has followed market structure for years, I don't think that IB is doing anything worse than anyone else, but they aren't innocent in this regard.
For what it's worth, one can't internalize options orders in the same way one can equity orders, purchased options flow must make it to the market. I'm not familiar with the history of this decision but I suspect it's since options are less liquid and have higher spreads, so internalization would get a much worse deal than say auctions. You can rebates from certain exchanges for initiating auctions on them, and can selectively initiate auctions on exchanges which benefit you more, but options orders themselves make it to the market
I'm not sure I completely understand this article, but I'd like to take this opportunity to rant about my recent experience using Robinhood. Two weeks ago I noticed that Tesla stock dropped significantly after the SEC's investigation into Elon Musk's "funding secured" tweet led to Elon being ousted as chairman of the board. I thought the stock would recover from this, so I placed a market price order for TSLA shares…
It was obvious to many people that the stock price would rebound significantly after Musk settled with the SEC, so the stock had already effectively increased in price before market open. Robinhood couldn't find anyone willing to sell you shares at the market close price Monday morning because there were none to be had.
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I read that analysis when it came out. I'm not sure how accurate it is... in the end Robinhood still needs to make money since they aren't charging the typical per trade commissions. You can probably back out what the HFTs margin is on this stuff by looking at public financials... KCG was public for a while.
Why would HFTs pay so much more for order flow from Robinhood vs other online brokerages?
On a more meta level, my firm suspects that Citadel is trying very hard to price other players out of the market even if it's at the cost of their current profitability, so they might be driving up the terms of newly minted deals. I don't work on the retail desk so I don't know.
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Exactly how do you think you're paying it here? Be specific. Later: to be clear, my subtext is that Robinhood customers aren't actually paying anything and are sort of getting a free lunch here. The money Robinhood pockets from your trades isn't available to you in any form, at least until someone starts the brokerage that pays you to trade.
Typical internalizer trade is: 1. RH user wants to buy 1000 shares of XYZ. Offer price is $10.00 2. RH forwards the full order to their execution venue partner. They get paid (assuming SeekingAlpha story is true) $260/$1mm traded, or $2.60. 3. Executor takes the order and immediately sends 900 shares to the market, lifting the offers. Now best offer is $10.10 4. Executor facilitates the tail of the order, 100 shares,…
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There is no market out there that lets you trade slower in return for providing a smaller margin for market makers. It is possible to build one, but it would look so different from existing markets that it would be an uphill battle to get people to adopt it.
Not sure I follow exactly what you're proposing. But it sounds like this was IEX's approach with their self-imposed speed bump.
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Seriously you'd think on a board ostensibly obsessed with CAC and ARPU metrics, it would be immediately obvious why a specialty player wouldn't want to compete with Schwab and Fidelity.
Multiple players along the chain could decide to vertically integrate. Although I used the example of high frequency traders, a better question which I should have asked is why hasn't someone dipped their toes into retail and HFT? It seems like someone would want to grab that land for themselves if it were particularly valuable, which the valuation of Robinhood purports. Considering some guys in that industry made th…