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

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

#101

Post by bagacrap »

eru wrote: post #75
chairmanwow1 wrote: post #3

I know this may be a slap on the wrist for Robinhood, but honesty the SEC is one of the branches of government that I trust almost as much as the FDA. I appreciate the work they do and I hope they continue it.

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 and doctors generally prefer officially sanctioned uses, lots of patients miss out on helpful treatment.

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

#102

Post by himoacs »

_cs2017_ wrote: post #88

ELI5: why exactly did the clients get bad execution? Does sending order flow to trading firms in itself cause unfavorable execution? Or did the trading firms treat order flow from RH differently than from other sources? Or is it something else? And does the fact that RH was receiving large payments for order flow impact the quality of execution?

Basically, if you want to buy AAPL at $100 and as your broker, I take that info and share it with someone else, such as an HFT, they will quickly (milliseconds/nanoseconds) buy AAPL and sell you at a higher price. So, while you expected to pay $100, you ended up paying $100.10.

Now that doesn't seem a lot to you but times the difference (10 cents) by volume and number of Robinhood customers placing orders and it can add up to be a lot.

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

#104

Post by _jal »

whimsicalism wrote: post #73
eru wrote: post #70

Earlier quoted context omitted.

Nobody forced you to sign up with them.

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 provided the best justice money can buy. They're just starting to implement a sort of buyers-club.

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

#105

Post by bagacrap »

gbronner wrote: post #22

This can and will be fixed by hiring the compliance department from another broker. Etrade just merged with MS, and a lot of the etrade people are in in the SF Bay Area....

they have agreed to bring in an "independent third party" although I have no idea how they can really remain independent when they're ultimately collecting a check from RH.

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

#106

Post by bagacrap »

ehejsbbejsk wrote: post #55

I believe this is to punish RH for offering zero commissions. Especially on options. I seriously think what RH offers, for anyone who’s traded options on the retail side, is a game changer.

The article states that RH cost its consumers more in bad trade execution than it saved them in commissions. How are you sure this didn't happen to you?

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

#107

Post by saddlerustle »

himoacs wrote: post #102
_cs2017_ wrote: post #88

ELI5: why exactly did the clients get bad execution? Does sending order flow to trading firms in itself cause unfavorable execution? Or did the trading firms treat order flow from RH differently than from other sources? Or is it something else? And does the fact that RH was receiving large payments for order flow impact the quality of execution?

Basically, if you want to buy AAPL at $100 and as your broker, I take that info and share it with someone else, such as an HFT, they will quickly (milliseconds/nanoseconds) buy AAPL and sell you at a higher price. So, while you expected to pay $100, you ended up paying $100.10. Now that doesn't seem a lot to you but times the difference (10 cents) by volume and number of Robinhood customers placing orders and it can…

That's not true. A $100 buy order will only ever execute at $100.

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

#108

Post by jtdev »

This is comical... As a Robinhood trader, I feel much less "misled" than I did when I was forced to invest in American Funds through an employers 401k plan. The mutual fund managers were scraping piles of money off my and my coworkers retirement nest-eggs and their mutual funds were consistently underperforming the market. The SEC couldn't be bothered to regulate where it matters, they're just gatekeepers and retail investors are not well liked by the power brokers.

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

#109

Post by bun_at_work »

befeltingu wrote: post #28
chairmanwow1 wrote: post #3

I know this may be a slap on the wrist for Robinhood, but honesty the SEC is one of the branches of government that I trust almost as much as the FDA. I appreciate the work they do and I hope they continue it.

Why do you trust the FDA?

A good reason to trust the FDA is that they have contributed to the safest food in the world! Our strict food regulations in the USA make things like trichinosis very difficult to spread around.

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

#110

Post by [deleted] »

_cs2017_ wrote: post #88

ELI5: why exactly did the clients get bad execution? Does sending order flow to trading firms in itself cause unfavorable execution? Or did the trading firms treat order flow from RH differently than from other sources? Or is it something else? And does the fact that RH was receiving large payments for order flow impact the quality of execution?

[deleted]
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