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Earlier quoted context omitted.
I think what was meant is "Robinhood the app's parent company, also named Robinhood"?
Given the tone I suspect the person meant "Citadel". Which is a view I don't endorse, but see often.
This is covered in great detail in today's Money Stuff, and you can usually skip a great deal of HN, um, truth-searching just by reading Levine first. https://www.bloomberg.com/opinion/articles/2022-12-15/the-se...
What does truth searching mean, that’s an interesting term.
Earlier quoted context omitted.
What does truth searching mean, that’s an interesting term.
HN comments (laypeople in general) tend to make very confident and very wrong comments on market structure
Former equity derivatives trader here. The Levine article linked to is one of the denser accessible discussions on the topic I’ve seen. Also, as a current English speaker, the “truth searching” the comment you’re responding to cites refers to the general process of learning, and nothing specific to market structure.
Earlier quoted context omitted.
There's an argument that it artificially increases spreads in lit markets, since you have segregated the least toxic flow to only go to a few select players (largely Citadel and Virtu). Further, these increased spreads mean that the 'price improvement' is only price-improved against a spread that's being quoted against only the most toxic flow. However, many spreads are still close to a single tick, although this is…
As a retail investor, I’d rather have PFOF and free trading instead of paying $5 to $10 a trade which is more expensive than spread improvements. That’s what PFOF has brought to retail investors. It’s not like retail investors was ever put onto the public exchanges prior to robinhood and PFOF, they were sent to dark pools for institutional investors to trade against but retail investor never got the benefit.
The payments per share tend to be extremely small - on most symbols the broker isn't making $5-10 per trade from the MM, for reasonably sized trades.
Even if payment for flow was costing you that much, paying for an order vs giving more price improvement are indistinguishable. Payment for order flow just means that price improvement definitely goes to the broker instead of back to you.
Earlier quoted context omitted.
HN comments (laypeople in general) tend to make very confident and very wrong comments on market structure
> comments (laypeople in general) tend to make very confident and very wrong comments on market structure Former equity derivatives trader here. The Levine article linked to is one of the denser accessible discussions on the topic I’ve seen. Also, as a current English speaker, the “truth searching” the comment you’re responding to cites refers to the general process of learning, and nothing specific to market structu…
That's the point, just read the Levine article instead of going through half-correct HN comments.
Also, I'm a native english speaker (and lived in 2.5 english speaking countries) and have never heard the phrase truth searching
How about get rid of obfuscated monetary bullshit like darkpools first
Assuming that you are interested in crypto, did you know that the vast majority of crypto trades happen in dark pools?
The first thing I did was open the article and search for PFOF (Payment for Order Flow). > This proposal would address a controversial practice called payment for order flow, in which some brokers collect rebates for sending customers’ orders to wholesalers. Mr. Gensler has called the practice a conflict of interest and, in past statements, left open the possibility of banning it. The SEC’s best-execution proposal do…
PFOF is not a problem, except that it hurts your pension funds. PFOF needs to be price improvement. Research has been done and it _does_ give price improvement. The main point of PFOF is that high frequency traders have much less risk when trading with single persons than they do trading with big players. They are willing to offer them much better prices than they will offer big players. Suppose there is 10cents diff…
But why should Robinhood or whoever else get part of the 10 cents that the algo is offering me, the little ol' retail investor? Just because they're in position to gobble some of it up without me knowing?
This is covered in great detail in today's Money Stuff, and you can usually skip a great deal of HN, um, truth-searching just by reading Levine first. https://www.bloomberg.com/opinion/articles/2022-12-15/the-se...
"Payment for order flow sort of created the zero-commission retail-brokerage model, but it’s not really necessary anymore. You can run a profitable retail brokerage on net interest margin, without charging for trades at all."
So what everyone should be complaining about is not PFOF, but "net interest margin". In other words everyone should be complaining about the brokers not paying enough interest on the cash balances in the brokerage accounts.
Earlier quoted context omitted.
HN comments (laypeople in general) tend to make very confident and very wrong comments on market structure
> comments (laypeople in general) tend to make very confident and very wrong comments on market structure Former equity derivatives trader here. The Levine article linked to is one of the denser accessible discussions on the topic I’ve seen. Also, as a current English speaker, the “truth searching” the comment you’re responding to cites refers to the general process of learning, and nothing specific to market structu…