I'm not saying we should be stopping them. But I also don't consider democratising and enabling gambling or taking drugs heroic. Similarly, I'm all for drinking alcohol yet wouldn't cheer for an innovation that would make people drink more. ---- That being said, I think that RH (and many other platforms) do in fact democratise investing (and that's great).
Do you consider legalising drugs as good for the society? Do you think drugs won't be advertised like how cigarettes and alcohol is being advertised. This is the price to live in a free society. You allow people to make their mistakes and live by its consequences.
I don't get how that's relevant? I can consider legalising X good and also consider it bad when more people in the society become addicted to X. That's not an inconsistent view.
> Do you think drugs won't be advertised like how cigarettes and alcohol is being advertised Many countries ban advertizing for cigarettes. So while it's not banned the cost on society and public health is large enough that it's worth restricting advertizing. I realize that likely seems totally weird for US folks, but that's really not weird at all in Europe. Same as regulating advertizing targeting kids, etc.
The US has banned tobacco ads on TV and radio for over half a century. It does not seem "totally weird" to us.
Though, to be fair, Robinhood offers reasonably spreads. They must execute client orders at a price as good as or better than the national best bid offer, if I understand correctly (Reg NMS [1]). Now, the firms that buy that order flow offer better (tighter) prices, an improvement over the NBBO, and what Robinhood does is take a cut of that improvement. (Robinhood takes a larger cut than other brokers, fair enough, b…
Robinhood's spreads are much larger than many other brokerages because of the deals they make with order flow buyers. Yes, they are still at or better than NBBO, but many brokerages will give you price improvement on crossing orders down to near the midpoint price (unless you are very good at timing the market and already have a great price from crossing). I did an A/B test of this, and found that RH was actually an…
I always had that little voice in the back of my head, that told me that RH and all the others are just feeding small investors' money to the big ones. I never really figuered out how, selling their order low at worse spreads than others explains a lot of my doubts, so. It also means that I will stay away from those brokers as far as possile. Well, not that I'm a potential client anyway, the only trading I do is with RSU and ESOPs I received over my career using whatever brokerage came with these packages. And then only to sell some from time to time, like once every other year if a all. If I want to gamble, I take ten bucks to the nearest casino's roullette table and have fun or an hour or so.
It’s interesting that they could be earning fees off their own underwriting. That would probably be an industry first.
Intercontinental Exchange is a publicly traded company. And they own and operate NYSE.
Yes, I know. I’m specifically talking about underwriting where the company raising funds typically pays a portion of the proceeds. This would be the first instance where the underwritee is earning fees off this process.
This is different to having ICE shares trading on NYSE.
Robinhood's spreads are much larger than many other brokerages because of the deals they make with order flow buyers. Yes, they are still at or better than NBBO, but many brokerages will give you price improvement on crossing orders down to near the midpoint price (unless you are very good at timing the market and already have a great price from crossing). I did an A/B test of this, and found that RH was actually an…
Matt Levine has some insight on this [1]. And you're right, Robinhood's price improvement was bad compared to standard brokers: > By March 2019, Robinhood had conducted a more extensive internal analysis, which showed that its execution quality and price improvement metrics were substantially worse than other retail broker-dealers in many respects, including the percentage of orders that received price improvement an…
> democratised is day trading and gambling, and that's not good
why is it not good? I think as long as the person doing the trading understands the consequences of their actions, they should be allowed to make that trade. If you could prove that people are being defrauded into thinking trading is risk free, then the problem isn't with robinhood but with education and awareness, and that issue must be solved at a societal level, rather than placing all responsibility onto the company providing a utility.
You are literally required to get better fill prices than the market with PFOF. You aren't being played any more than if you just send a normal limit order to the market
Why—exactly—do you reason that someone is willing to pay $109 per user per year for their order flow? Put another way, Robinhood’s actual customers are confident that they are able to extract in excess of $109 in value each year they purchase the flow of orders from a given Robinhood user. From where and/or from whom do you suppose this money is being extracted?
There may be opportunity to build a Robin Hood competitor by transparently passing the PFOF fees through to users, rather than pocketing them (as Robin Hood does). Imagine if you paid a monthly $5 subscription to be a member of a broker, and then had unlimited free executions, with the PFOF fees being clearly shown, and credited to your account.
I understand that many give Robinhood crap because it is not "sophisticated enough" or because of the Gamestop fiasco. Although many startups like to claim that they are "democratizing [x]", I honestly believe they did it. I have many friends that never traded before, and after they got their Robinhood account they feel comfortable enough to do it often. Even myself, who used to only trade a couple of times a year, s…
Index funds democratized investing. Robinhood “democratized” the worst part of investing and exposed unsophisticated investors to the instruments they are most likely to underperform on. Individual stock picking is probably worse than indexes but fine, however the incentive to day trade or trade complex derivatives is almost certainly going to hurt people far more often than a Vanguard account. It’s not a coincidence…
While index funds were arguably a much much more important step, there were few funds you could invest in for less than $3,000 up until several years ago. And those that were less than $3,000 initial investment were around $1,000. A lot of folks can't afford that all at once.
I imagine a large portion of the internet newly flushed with GME/AMC/WISH cash are lining up to short this in to the ground. I'll personably be buying everything i can get my hands on three months after launch
Would be hilarious if they ended up on the other end of a short squeeze.
That's exactly what i'm aiming for, i'll chuck a few grand in the opposite direction just for a laugh.
> In 2011-2015, Daniel Gallagher was 1 of 5 Commissioners of the SEC > his previous job was at WilmerHale, a firm specializing in defending other firms against the SEC. How is that situation even remotely legal?
Why wouldn't it be as long they follow the law in both jobs? It is like defense attorney becoming a prosecutor or an IRS employee becoming a tax advisor. The best person to give advice on a subject are those who have experience on both sides.
Because its a massive conflict of interest.
Its the same reason you wouldn't let a Defence contractor CEO be secretary of defence, or why you shouldn't let a telecoms lobbyist run the FCC.