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Why ‘Free Trading’ on Robinhood Isn’t Really Free

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Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#21
post #11

Earlier quoted context omitted.

> Wall Street, where crime is legalized and so none of the suits go to jail Crime is not legal on Wall Street nor anywhere else in America. If you don't like the laws, we have a system to change them. It seems like you disagree with the finance profession, whose purpose is to efficiently move and allocate capital.

I feel like you're being deliberately naive. When people talk about crime being legal on Wall Street, they're referring to the many cases of fraud on the scale of billions of dollars that result in no jail time for the people involved. Sometimes there will be fines, but the fines are significantly less than the amount of money the bank profits from the fraud. For a couple quick examples that immediately come to mind,…

> they're referring to the many cases of fraud on the scale of billions of dollars that result in no jail time for the people involved

Yes, this exactly is what I meant. Laws are written and passed that legalize what would otherwise be criminal conduct, and on the other side, the SEC will simply levy fines on fraud and no-one goes to jail [1].

Usually the fines, even if it's millions, is just a blimp on the quarterly profits of the wall street entity in question.

> BNP used a network of banks in the Middle East, Europe and Africa with their own clearing codes to mask dollar-based transfers connected to Sudanese companies. Employees also removed information from wire transfers that could have revealed the identity of the countries blacklisted by the United States, according to the complaint.

Source: France’s BNP Paribas to pay $8.9 billion to U.S. for sanctions violations => https://www.washingtonpost.com/business/economy/frances-bnp-...

In this case, BNP Paribas officials at the highest level were involved in laundering money for the Sudanese Government, directly working with Govt officials. This directly translated to funding genocide in the South Sudan war (by way of the Sudanese Govt purchasing weapons and killing people). Yet not a single person went to jail from BNP Paribas. The fine they paid is nothing compared to what they make in yearly profits.

Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#22
post #20

Earlier quoted context omitted.

arent you ignoring the externalities ? >>which allows free trades at slightly more expensive prices so they arent free, its priced in. Not criminal, but misleading and could be construed as corrupt. >> t's arguable that pharmaceutical rebates are bribery, so is the pharma industry criminal? are the rebates helping to push a drug that they know to be addictive? if its not criminal, it should be. >> College football co…

I’ve found that going down the path of being outraged at large fractions of society, such as industries / politics / belief systems, is extremely tiresome and makes you permanently angry at the world. More nuance can give you a healthier outlook, or you risk forever throwing rocks at a mountain.

You arent giving nuance. Your just acting as a contrarian, interpreting the original comment literally, then pedantically responding. thats not helping a discussion

Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#23

Earlier quoted context omitted.

I feel like you're being deliberately naive. When people talk about crime being legal on Wall Street, they're referring to the many cases of fraud on the scale of billions of dollars that result in no jail time for the people involved. Sometimes there will be fines, but the fines are significantly less than the amount of money the bank profits from the fraud. For a couple quick examples that immediately come to mind,…

> they're referring to the many cases of fraud on the scale of billions of dollars that result in no jail time for the people involved Yes, this exactly is what I meant. Laws are written and passed that legalize what would otherwise be criminal conduct, and on the other side, the SEC will simply levy fines on fraud and no-one goes to jail [1]. Usually the fines, even if it's millions, is just a blimp on the quarterly…

US sanctions or not, I'm sure they did not make $8.9 billion on those transactions.

The Sudanese government could likely still purchase weapons with euros or roubles.

The only situation where sanctions are effective (for now) is when countries need to sell commodities into USD, i.e. oil. But that is also changing as the dollar becomes less of a global reserve currency.

Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#24
post #20

Earlier quoted context omitted.

I’ve found that going down the path of being outraged at large fractions of society, such as industries / politics / belief systems, is extremely tiresome and makes you permanently angry at the world. More nuance can give you a healthier outlook, or you risk forever throwing rocks at a mountain.

You arent giving nuance. Your just acting as a contrarian, interpreting the original comment literally, then pedantically responding. thats not helping a discussion

I personally do not think the financial industry, nor wall st in particular, is a bastion of criminality that all of us should automatically hate as educated people.

Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#26
post #11

> It’s a controversial but legal practice in the brokerage industry called payment for order flow. and then > But that’s only if the broker passes that benefit, which brokers call “price improvement,” down to the customer. > It’s unclear whether Robinhood gives customers that benefit So the customer is not benefiting in this case, yet it's not illegal, just "controversial". ...Like a whole lot of other things on Wall…

> Wall Street, where crime is legalized and so none of the suits go to jail Crime is not legal on Wall Street nor anywhere else in America. If you don't like the laws, we have a system to change them. It seems like you disagree with the finance profession, whose purpose is to efficiently move and allocate capital.

> Crime is not legal on Wall Street nor anywhere else in America.

The big banks pay fines for money laundering yet no bankers go to jail.

Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#27

> The difference is often less than a penny. But it adds up for larger trades. Schwab, for instance, says that for orders of 500 to 1,999 shares of S&P 500 companies, the average savings from price improvement is $10.80. Ok and Schwab charges $4.95 for trades. So an investor ends up saving $5 per trade. S&P 500 companies stock price ranges from $20 to $1200 so to buy 500 shares of a company with $20 price per share w…

> average savings from price improvement is $10.80. I wonder if they lie about this like Fidelity does. If the market on some product is 100.00/100.06 with a mid price of 100.03, and I route an order at the mid price that is filled at 100.02 that is then a price improvement of 1 cent. On Fidelity I've noticed they calculate everything off the asking price, and would say my price improvement was .04, which is not real…

Fidelity isn't lying. The price improvement IS .04, not .01.

https://www.sec.gov/reportspubs/investor-publications/invest...

> The opportunity for "price improvement" – which is the opportunity, but not the guarantee, for an order to be executed at a better price than what is currently quoted publicly

It's measured with reference to the quote, not your order price. Think about it, if you sent a limit order for $20.02 and got filled at $10.02, did you get $10 of price improvement?

Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#28
You can tell by how there is pretty much zero mention of the fact that this is an industry wide practice which every single brokerage does the strong bias of this article. Except with other brokerages too by the way, they’re also charging you another $4.95 for their “services” they’ve provided.

Now just because payment for order flow is done by every brokerage doesn’t mean it’s necessarily okay to do in my opinion. I have some qualms about it, but the issues are complex. The market makers brokerages route their orders provide liquidity and stability that without their existence would result in a far more volatile market.

Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#29
This is pretty standard practice, we are able to offer flat-rate comission-free trading here at KloudTrader for the same reason. Cleared through Apex via Tradier. You give up some control over routing and liquidity etc. for zero commission per trade

Shameless plug: https://KloudTrader.com/Narwhal

Re: Why ‘Free Trading’ on Robinhood Isn’t Really Free

#30

Earlier quoted context omitted.

> average savings from price improvement is $10.80. I wonder if they lie about this like Fidelity does. If the market on some product is 100.00/100.06 with a mid price of 100.03, and I route an order at the mid price that is filled at 100.02 that is then a price improvement of 1 cent. On Fidelity I've noticed they calculate everything off the asking price, and would say my price improvement was .04, which is not real…

Fidelity isn't lying. The price improvement IS .04, not .01. https://www.sec.gov/reportspubs/investor-publications/invest... > The opportunity for "price improvement" – which is the opportunity, but not the guarantee, for an order to be executed at a better price than what is currently quoted publicly It's measured with reference to the quote, not your order price. Think about it, if you sent a limit order for $20.02…

> if you sent a limit order for $20.02 and got filled at $10.02, did you get $10 of price improvement?

Yes. That's a rather extreme example, but If I route a limit order for X and get filled for Y, my price improvement is X-Y, not the asking price - X. I guess it depends on if you consider the price of something to be the mid price or the bid/ask price.

As far as I am concerned Fidelity IS lying. The market on the thing could be 100.00/100.10, with a LAST trade price of 100.05. I route a limit order for 100.05 and get filled at 100.05 and fidelity claims I got price improved by 5 cents, which is bullshit.

edit: also, that page you linked and quoted is specifically talking about market orders:

> Here's an example of how price improvement can work: Let's say you enter a market order to sell 500 shares of a stock...

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