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If the SEC has gone through and has accounted for the 34 million in cost to consumers, why are they not having robinhood reimburse the customers for their lost money on the trades and then charging the additional 30 million on top for lying? Why does the SEC take all the money?
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This is front running and illegal.
Yes, exactly. That's what this submission and charge by the SEC is all about. Is everyone just forgetting the entire purpose of this submission is that Robinhood used pay for order flow to facilitate front running?
- You trying to buy 100 shares for $100 each - Someone is selling 100 shares for $98 each - RH supposed to fill order at best price ($98) - RH didn't do that.
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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...
Why IBKR over, say Schwab or Vanguard?
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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.
If that’s indeed the case then we should throw the book at them. Breaking the law is different than selling a service for free and monetizing your consumers.
Oh, don't worry. Robinhood agreed to sign a piece of paper agreeing that it wouldn't break the law any more.
And just to be clear, this isn't the first time that Robinhood has blatently broken the existing laws and regulation.
The "infinite money" "glitch" is a situation which is straight-up codified to be not allowed (for obvious reasons). They were either incompetent or negligent.
They attempted to release a "bank account" product and claimed it would be covered by insurance which it would not be. Again, either incompetence, or negligence.
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SEC doesn't work on behalf of consumers, it works on behalf of the federal government. Robinhood customers are still free to bring lawsuits against the company and those would be heard in courts.
The SEC's stated mission is "to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation." I would equate Robinhood consumers with investors. And plaintiff securities class action law firms are undoubtedly drafting complaints as we type.
Earlier quoted context omitted.
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...
Why IBKR over, say Schwab or Vanguard?
If you have an account value of over $110,000 IBKR will offer you the industry's lowest margin rates (as low as 0.75%, tax deductible) and very competitive order pricing, without PFOF. Of course with a substantial account you can ask any of them to match IBKR margin rates and they likely will.
I sell a lot of margin-secured put options for passive income, and having a 15% portfolio margin maintenance requirement gives me a lot of headroom -- not that I'd ever max it out, I just don't want to be anywhere close. Further the margin impact of out of the money options is also calculated generously.
They also offer access to basically any product in any market anywhere in the world. I sell index futures options in the US for instance, but if you want to trade on Canadian, European, Australian or Asian exchanges, it's just a button click away.
You can also practice tax-aware borrowing and use their debit card to make purchases against your margin, and also, they offer bill pay which works against your margin balance too. My personal economy involves holding a 6-month cash buffer in my bank account, and investing anything that comes in - and borrowing against it to pay bills. Then, I use the proceeds from my short-term options trades, and dividends from my longer-term positions, to pay them off.
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…
Thanks for answering my question how Robinhood, Traderepublic and so on make money.
Earlier quoted context omitted.
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...
Why IBKR over, say Schwab or Vanguard?
> As the SEC’s order finds, one of Robinhood’s selling points to customers was that trading was “commission free,” but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices. Despite this, according to the SEC’s order, Robinhood falsely claimed in a website FAQ between October 2018 and June 2019 that its exe…
What is the best way to migrate away from Robinhood?