SEC charges Robinhood $65M for misleading customers about revenue sources • Hacker News Board

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

#311

Post by kortilla » Sat, Dec 19, 2020, 7:42 AM UTC

ajhurliman wrote: post #292

smabie wrote: post #251

Earlier quoted context omitted.

No it's the risk of losing money. So let's say I'm quoting a tight spread and a small buy order comes in and I get hit. No problem. I don't adjust my quotes because that small of order will not impact the price. But now more orders are coming in from the same institution, buying more and more (basically one big meta-order broken up into small orders so as to conceal intent). If I don't realize that all of these small…

So if someone's buying a stock, the market maker actually takes a short position to make it available to the buyer? I was under the impression that market makers are just connecting market and limit orders with each other, is that not the case?

No, the exchange already matches a buy at market order to the best limit sell. A market maker is who is filling up the order books with offers to buy and sell at different prices under the hope that a regular trader will come in later with a trade the other direction at a better price.

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

#312

Post by eru » Sun, Dec 20, 2020, 9:56 AM UTC

bagacrap wrote: post #101

eru wrote: post #75

Earlier quoted context omitted.

Are you sure the current FDA is worth your trust? Or are you being cynical? The pre-1962 FDA had perhaps the better regulatory framework: back then new drugs had to show safety, now they have to show safety and efficacy. Off-label prescription show that efficacy requirements are not necessary in practice, and just needlessly delay drugs and make their development more expensive.

I for one am glad that pharma companies aren't allowed to peddle prescription meds that don't actually work. If there's some other use case for that drug (your "off label" application) then it will pass through the approval process with efficacy proven for that. I think it's more of a dilemma that off label scrips aren't used more often. Since there's zero monetary incentive to prove efficacy for a second application…

You know that there is no approval process for off label prescriptions? Doctors just use their so called clinical judgement.

The suggestion would be to go back to pre-1962 regulations, and put normal and off-label prescriptions on the same footing.

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

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Post by eru » Sun, Dec 20, 2020, 9:59 AM UTC

_jal wrote: post #104

whimsicalism wrote: post #73

Earlier quoted context omitted.

I haven't. But there are obvious power dynamics when large market actors can get people to waive their right to sue. There's a reason they're called "inalienable." They're not supposed to be self-alienable either.

One of many good reasons to worry about the composition of the SCOTUS - important cases effecting this very right are headed there, and this is the most "business-friendly" (as the euphemism goes) court in quite some time. Too bad it is probably too late on these issues; we're approaching a situation where an increasing amount of "little people" law will be handled in arbitration. Justice in the US has always provide…

> Justice in the US has always provided the best justice money can buy.

Alas, no. If this were really about money only, you could design a much better system. This ain't the best money can buy. (Perhaps look at some actual business-friendly jurisdictions for examples.)

It's a whole hodge-podge of incentives.

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

#314

Post by eru » Sun, Dec 20, 2020, 10:00 AM UTC

rchaud wrote: post #155

LanceH wrote: post #138

Earlier quoted context omitted.

It can give the feel of extortion. Settle or else. There is quite a window where settling -- even when provably innocent -- is easier/cheaper than facing an agitated prosecutor. Settling has nothing to do with a finding of truth.

Do you have any evidence to base this on? Robinhood could easily afford to go to court if they felt the evidence was on their side. $65 million is probably more than what they've ever made in profits, so if they can pay it off without blinking, chances are a court case would result in an even larger fine. On the same token, it's doubtful that the SEC would proceed to charge Robinhood if they knew they couldn't make t…

The SEC threatens to sue for a much larger fine, so they can offer to settle for $65 million.

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

#315

Post by Dylan16807 » Sun, Dec 20, 2020, 10:13 AM UTC

tptacek wrote: post #203

vslira wrote: post #184

Earlier quoted context omitted.

In order words: if I want to buy something that costs 100, the broker is free to get me a price of 95, but they were colluding with the players able to offer this discount to offer me 97 instead and pocket the extra 2, something like that?

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…

There are some pretty fine hairs being split here between different kinds of "best".

But just for reference I thought Robinhood took all of the improvement! So their marketing definitely wasn't universally misleading.

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

#316

Post by quickthrowman » Sun, Dec 20, 2020, 3:09 PM UTC

jamesmehaffey wrote: post #137

quickthrowman wrote: post #100

Earlier quoted context omitted.

How is a discount brokerage a tech company? They’re .. a brokerage, just like Schwab or E*Trade.

Yeah, that’s not really the point. People are going to avoid using these types of services, whether it’s Robinhood or some other startup, if they think they are going to get scammed. It is bad form, and the thing is that they knew that people have been skeptical about their sources of revenue for some time now.

Every other discount broker sells order flow too, and they’ll approve you for options trading if you say you have enough experience. I’m not sure why you think Robinhood is any different than TD or Schwab.

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

#317

Post by argonaut » Mon, Dec 21, 2020, 2:25 PM UTC

ummonk wrote: post #241

argonaut wrote: post #66

Earlier quoted context omitted.

Schwab also receives payment for order flow (AKA selling your orders): https://www.schwab.com/legal/order-routing-1 . In fact, every retail brokerage I'm aware of receives payment for order flow. Schwab also has outages although not as bad as Robinhood was this year.

Is Interactive Brokers not considered a retail broker?

IBKR has two tiers. Their free "lite" tier (targeted at retail) receives payment for order flow. Their Pro tier (which charges a monthly fee) does not.

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

#318

Post by sagarm » Sun, Dec 27, 2020, 3:59 AM UTC

bigwavedave wrote: post #187

jstummbillig wrote: post #170

Earlier quoted context omitted.

You can put a clause in your contract that prohibits someone from using specific legal action at your discretion? That sounds wild so I am interested. What is the justification for this? How could anyone basically preemptively and effectively exempt themselves from specific legal action regardless of wrongdoing? What would happen if the other party tried anyway?

Oh, this is extremely common in the boilerplate of almost every single contract and ToS I've read in my adult life (IANAL, just referring to the contracts I've signed or chosen not to sign that I've come across). If you look at something like the contract for your credit card, I guarantee you'll find a clause entitled "Arbitration", "Mediation", or something akin to that where it basically says "If something bad happ…

These class action waivers began to completely take over after DirectTV vs Imburgia was decided in 2016:

https://www.jonesday.com/en/insights/2016/01/us-supreme-cour...

An increasingly extreme Supreme Court has repeatedly expanded the ability of employers and service providers, including ISPs, to prohibit class actions in their contracts. Even retailers now attempt to compel their customers into forced arbitration.