SEC charges Robinhood $65M for misleading customers about revenue sources

Post by toast0 » Thu, Dec 17, 2020, 9:41 PM UTC

silexia wrote: post #270

toast0 wrote: post #261

Earlier quoted context omitted.

Assuming they don't change their practices, it's always better to use a different broker. Robinhood was the first to eliminate comissions, but now most brokerages have also eliminated comissions, so say thanks to Robinhood and then use an established broker. I would expect market and limit orders to have been handled similarly. Market makers would like to trade with retail investors, and they're willing to pay X for…

Use Interactive Brokers Pro, then you can put in market orders and know you'll get the best fair price.

Post by fakedang » Thu, Dec 17, 2020, 9:52 PM UTC

arcticbull wrote: post #213

tptacek wrote: post #203

Earlier quoted context omitted.

There is a notional standard "best price", the NBBO, that a broker-dealer has to meet; you can't take payment to route an order somewhere that doesn't meet the NBBO. But the NBBO captures pricing from all kinds of traders. Retail traders are cheaper to trade with than institutional traders, because retail traders aren't moving gigantic blocks of stock that are going to blow up the market makers that are facilitating…

FWIW InteractiveBrokers, in their Pro accounts (the one you pay albeit very low commission fees for) doesn't accept payment for order flow. Their Lite accounts (the one they launched to compete with RobinHood) do accept PFOF. [1, 2] [1] https://www.reuters.com/article/us-usa-brokers-fees-idUSKBN1... [2] https://gdcdyn.interactivebrokers.com/Universal/servlet/Regi...

Post by nbardy » Thu, Dec 17, 2020, 10:00 PM UTC

donohoe wrote: post #53

I feel that if a company is paying a fine of 1M or more, someone should also be going to jail - otherwise there is not going to be any meaningful accountability.

Post by sweeneyrod » Thu, Dec 17, 2020, 10:08 PM UTC

tptacek wrote: post #242

hef19898 wrote: post #238

Earlier quoted context omitted.

I always wondered how these companies made money. My first suspicion was, that they "fed" stupid retail clients thay had no place in trading to the big fishes. 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 disru…

The "certain regulation" here is simply that you can't advertise to your customers that you're getting them the best possible deal when you have deliberately chosen not to give them the best deal. As the SEC points out: their pricing isn't better than traditional brokerages. This isn't like Uber, where the lie is that the low prices are subsidized by investors and will be jacked up later on down the road; here, the l…

Post by giobox » Thu, Dec 17, 2020, 10:14 PM UTC

hansvm wrote: post #244

giobox wrote: post #202

Earlier quoted context omitted.

It’s about more than just the cash cost though. In many jurisdictions court cases decisions can create legally binding precedent. Arbitration typically does not, a critical advantage when Uber was very busy trying to make sure courts the world over never decided drivers are employees etc. Arbitration could never really make that distinction binding, risk a court might.

That's a fair point. Mildly off-topic: What do you think about alternative systems (e.g. UBI) which decouple safety nets from employment? I'm still young and naive, but it seems like we could avoid the whole legal morass of contractor vs hourly employee vs salaried employee who must be paid for extra hours worked vs "real" salaried employee, state constitutional amendments requiring 7/8 supermajorities to overturn, h…