231–240 of 318 posts
To add a bit of context: brokerages like Robinhood send buy/sell orders to national exchanges and to private trading firms e.g. high-frequency traders. Private firms provide price improvement: orders that execute at prices better than the national exchange. All brokerages have a duty of best execution, including a duty of price improvement. Brokerages can also receive payment for order flow from private firms, as lon…
To add a bit of context: brokerages like Robinhood send buy/sell orders to national exchanges and to private trading firms e.g. high-frequency traders. Private firms provide price improvement: orders that execute at prices better than the national exchange. All brokerages have a duty of best execution, including a duty of price improvement. Brokerages can also receive payment for order flow from private firms, as lon…
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More like you want to buy something that would cost 100, and RH got paid 5 to send your order to a trading company, and that trading company executed at 101.
No. If you had a limit buy, Robinhood would never exceed your limit. Period. That would be highly illegal. This is more like you want to buy something at 100. Robinhood then goes to the market and looks at all the vendors. The vendors are selling at various prices. Robinhood has a relationship with one of the vendors so they went there and that vendor was willing to sell at 98. However, a vendor down the street (that…
The limit in a limit order is really an orthogonal concept.
Earlier quoted context omitted.
More like you want to buy something that would cost 100, and RH got paid 5 to send your order to a trading company, and that trading company executed at 101.
No. If you had a limit buy, Robinhood would never exceed your limit. Period. That would be highly illegal. This is more like you want to buy something at 100. Robinhood then goes to the market and looks at all the vendors. The vendors are selling at various prices. Robinhood has a relationship with one of the vendors so they went there and that vendor was willing to sell at 98. However, a vendor down the street (that…
I always wondered about the name 'Robinhood' since it applies taking from the rich and giving to the poor. Maybe it could be renamed to Sheriff of Nottingham.
I believe the idea is that they are taking access to finance from the rich and giving it to the poor. Commissions are often flat dollar amounts, so the more money you have, the less significant they are. Charging a percentage (which this is effectively doing) benefits small trades and hurts large ones. And I believe they still meet or beat market rates, they just find savings that they don't pass along to the traders…
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Just to check my own understanding... So roughly, the idea is that if I’m smart money (say a big hedge fund or institutional trader), behind any of my trades is an implication that I know something worthwhile. So my trades will move the market, and this can leave market makers holding the bag if prices move quickly. But if I‘m the proverbial dentist, my trades are just noise that don’t signal anything real about the…
Yep, that's pretty much spot on.
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so now we're victim blaming for robinhood not disclosing where they make money?
Nobody is the victim here. People got a free service to buy stocks and Robinhood sold that deal flow to bigger investors.
Earlier quoted context omitted.
More like you want to buy something that would cost 100, and RH got paid 5 to send your order to a trading company, and that trading company executed at 101.
No. If you had a limit buy, Robinhood would never exceed your limit. Period. That would be highly illegal. This is more like you want to buy something at 100. Robinhood then goes to the market and looks at all the vendors. The vendors are selling at various prices. Robinhood has a relationship with one of the vendors so they went there and that vendor was willing to sell at 98. However, a vendor down the street (that…
I learned so much in this thread, making it one of my favorites. And showing again why HN is the great thing it is.
Also, even I wasn't really right, RH and others sure found a way to price and sell an existing service better than incumbents. And in good disruptive tradition seem to have ignored certain regulations.
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Nobody is the victim here. People got a free service to buy stocks and Robinhood sold that deal flow to bigger investors.
The claim is that they sold that deal flow in a sub-optimal way that is expressly prohibited from them doing, and it led to consumers not getting the price that they, by law, should have been given.
I believe this is to punish RH for offering zero commissions. Especially on options. I seriously think what RH offers, for anyone who’s traded options on the retail side, is a game changer.