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Robinhood raises $323M at a $7.6B valuation

reuters.com

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Re: Robinhood raises $323M at a $7.6B valuation

#91

Post by H8crilA »

tomp wrote: post #81
H8crilA wrote: post #76

Earlier quoted context omitted.

That makes sense too (avoiding competition). But it's not what the quoted article says. Institutional trading (like mutual funds) certainly is a problem for market makers: > Sometimes, when a customer buys 100 shares at $100.01, it then buys another 100 shares at $100.02, and another 100 shares at $100.03, and keeps going until it has bought 10,000 shares and pushed the price up dramatically. The market maker who sol…

Indeed, this isn't a comment on your summary (which I have no reason to not believe to be accurate). I'm commenting on the ideas behind the article itself. Still, I disagree. Even a large order won't "move" the market by itself (unless you're the Fed). At best, it might trigger a flash crash (we've seen a few of these in the past few years), where liquidity temporarily dries up (HFT market makers remove their passive…

This is not Japan, the FED is not trading equities.

And continuous movement of price in one direction is bad for market makers. Read the linked article, it explains why.

Re: Robinhood raises $323M at a $7.6B valuation

#92

Post by tuesdayrain »

mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

> I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood.

If you're investing a decent amount, you're better off using limit orders. No real debate to be had there.

Re: Robinhood raises $323M at a $7.6B valuation

#93

Post by rconti »

bjacokes wrote: post #83
adammenges wrote: post #70

Earlier quoted context omitted.

Yeah would love an answer here too

When you sell shares, cost basis is reported to the IRS by the brokerage. The parent comment suggests that RH always reports the FIFO cost basis, i.e. price of the first shares you bought as opposed to the last shares. There are places on tax forms where you can adjust your cost basis up or down from the one reported by your brokerage, but (without doing any research into it) I doubt that "I don't want to use my brok…

I really have no idea, but it's a VERY new thing that brokerages even report this information. The 1099-B can't be more than a decade old. You used to have to track it all yourself. I suspect you can use your own cost basis method. (subject to rules; of course you have to be consistent)

That said, this is definitely not tax advice, and even if it's legal/allowable, you're almost certainly more likely to be audited if your numbers don't agree with what the brokerage reports.

Re: Robinhood raises $323M at a $7.6B valuation

#94

Post by SergeAx »

rolltiide wrote: post #72
SergeAx wrote: post #65

DST Global is a pocket of Russian oligarch Alisher Usmanov, alleged criminal, Putin's sidekick, owner of Russian social network VK, which committed numerous acts of personal information disclosure to police and FSB without court order, led to prosecution of political activists and common people. Good luck, Robin Hood (

well the money is clean now and Sequoia followed the lead, so nobody important cares about that, lets stop spending resources on whitelisting monetary transactions to begin with. the audacity to try to limit capital flows based on owner behavior was always misguided. if you disagree with something Alisher did, then you have to indict the people that actually did it. vilifying money is just lazy.

Of course the money is clean now, that's the sole purpose of DST Global.

Re: Robinhood raises $323M at a $7.6B valuation

#95

Post by dmix »

claytonjy wrote: post #28
mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

I'll add Matt Levine's insightful take here [0], which delves a bit into the "deal for order flow" controversy, and also makes the unique claim that for Robinhood to engage in this is very much in line with "taking from the rich and giving to the poor", because it does guarantee price improvement for RH users. [0] https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i...

http://archive.is/DzFOg

Re: Robinhood raises $323M at a $7.6B valuation

#96

Post by raiyu »

mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

So this isn't about moving the market itself with the orders. There are numerous exchanges on which shares are bought and sold. They aren't just traded on the NYSE and NASDAQ. In fact most large investor institutions have their own Dark Pool exchanges.

What Robin Hood does is sell the orders to high frequency traders, which then front run these orders and can great a small incremental disparity per trade. It's not even .01 per trade.

However, the benefit is that every trade is done at a profit to the high frequency trader, because they are simply fulfilling an order, and not holding the stock.

And to the regular small investor, the price movement is inperceptible.

The actual work of high frequency traders was discovered by large institutions because their order volumes were much higher and because they were much more price sensitive, and they saw a much larger swing in their price from which they were closing transactions.

This was all detailed in Michael Lewis' book "Flash Boys". So if you liked "The Big Short", this one is a must read as well. So in this case they are giving from the poor to the rich, but it's really a small imperceptible amount and because of the vagueness of what's happening most retail investors are completely unaware nor that much interested in what's happening here.

You are getting a zero commission trade, which may cost you $7 somewhere else, do you really care if someone tacks on a $0.50 cent charge? You are still up $6.50.

Re: Robinhood raises $323M at a $7.6B valuation

#97

Post by jackmodern »

raiyu wrote: post #96
mattferderer wrote: post #21

I'm curious if anyone with knowledge can speak to how Robinhood sells data to high frequency traders? This seems to result in a large percentage of their revenue which of course makes sense due to not having commission revenue. I've also heard some people argue if you're investing a decent amount, you're better off with commissions over market orders on Robinhood. The arguments were the above & that orders can take a…

So this isn't about moving the market itself with the orders. There are numerous exchanges on which shares are bought and sold. They aren't just traded on the NYSE and NASDAQ. In fact most large investor institutions have their own Dark Pool exchanges. What Robin Hood does is sell the orders to high frequency traders, which then front run these orders and can great a small incremental disparity per trade. It's not ev…

I disagree with a lot of this comment, but the largest most glaring mistake is around the perception that robinhood is without fees. Robinhood takes their cut by creating a larger than normal bid/ask spread. I promise you their cut is more than $.50 and most likely > $7 (at least in Crypto land where I have witnessed this behavior). To think that HFT firms are using this data to only front run orders also feels pretty naive to me, but I'm no expert.

Re: Robinhood raises $323M at a $7.6B valuation

#98

Post by toast0 »

tomp wrote: post #81
H8crilA wrote: post #76

Earlier quoted context omitted.

That makes sense too (avoiding competition). But it's not what the quoted article says. Institutional trading (like mutual funds) certainly is a problem for market makers: > Sometimes, when a customer buys 100 shares at $100.01, it then buys another 100 shares at $100.02, and another 100 shares at $100.03, and keeps going until it has bought 10,000 shares and pushed the price up dramatically. The market maker who sol…

Indeed, this isn't a comment on your summary (which I have no reason to not believe to be accurate). I'm commenting on the ideas behind the article itself. Still, I disagree. Even a large order won't "move" the market by itself (unless you're the Fed). At best, it might trigger a flash crash (we've seen a few of these in the past few years), where liquidity temporarily dries up (HFT market makers remove their passive…

> Even a large order won't "move" the market by itself

Certainly, the market moves when two parties agree on a price, so one order doesn't move the market by itself; however, a large order in combination with normal market behaviors will result in the market moving higher.

When you buy the book, the market makers are going to replace their sell limit orders at higher prices. If you have a lot more shares to buy, you're going to buy out those too. If you've done a fair bit of buying this way, and market makers had been selling short, they're going to want to buy to cover, which adds to or sustains the price increase.

This price movement isn't great for the institution or the market makers.

Market makers would rather trade against retail investors -- they don't make a lot of large trades, so they don't move the markets very much, and there's not the same risk of getting run over.

Institutional investors would rather trade in ways they can get a fair price without influencing the price -- if they can find counterparties to trade with on a volume weighted average price basis, they prefer that -- or they try to structure their orders to avoid hitting the market all at once.

Re: Robinhood raises $323M at a $7.6B valuation

#99

Post by adrr »

elamje wrote: post #88
tomp wrote: post #75

Earlier quoted context omitted.

> Their servers are located in the exchanges, so they can buy the 100 shares of Apple for $99.99 each quickly, then flip them to you for $100 each, effectively giving them a risk free profit of $1. I don't know a lot about trading US equities, but this sounds wrong. Brokers are required by law to give their customers the best price ($99.99 in your example). https://en.wikipedia.org/wiki/National_best_bid_and_offer

Brokers are required to, yes. But Robinhood doesn’t submit orders directly to exchanges, it always passes through a middle man who has to collect some fee for their service.

Robinhood is a broker dealer.

Re: Robinhood raises $323M at a $7.6B valuation

#100

Post by ikeboy »

jackmodern wrote: post #97
raiyu wrote: post #96

Earlier quoted context omitted.

So this isn't about moving the market itself with the orders. There are numerous exchanges on which shares are bought and sold. They aren't just traded on the NYSE and NASDAQ. In fact most large investor institutions have their own Dark Pool exchanges. What Robin Hood does is sell the orders to high frequency traders, which then front run these orders and can great a small incremental disparity per trade. It's not ev…

I disagree with a lot of this comment, but the largest most glaring mistake is around the perception that robinhood is without fees. Robinhood takes their cut by creating a larger than normal bid/ask spread. I promise you their cut is more than $.50 and most likely > $7 (at least in Crypto land where I have witnessed this behavior). To think that HFT firms are using this data to only front run orders also feels prett…

I don't know about crypto but on stocks they're legally not allowed to execute a transaction outside the NBBO. See https://en.wikipedia.org/wiki/National_best_bid_and_offer
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