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Robinhood S-1 IPO

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Re: Robinhood S-1 IPO

#371

Post by kolbe »

SilasX wrote: post #367
kolbe wrote: post #132

Earlier quoted context omitted.

Former CBOE market maker here. You and the person you're responding to both have valid arguments. The problem is you are choosing only to present the ones that make this situation look good, and he's only insinuating the bad ones. The fact is that this "spread" you speak of is a much more theoretical concept than Matt Levine understands. There is ample liquidity between the bid-ask in 99.9% of markets, and by selling…

>The fact is that this "spread" you speak of is a much more theoretical concept than Matt Levine understands. There is ample liquidity between the bid-ask in 99.9% of markets, and by selling order flow to someone who will internalize it at the worst legal price possible, they are intentionally failing to fill an order at the best possible price. I remember reading about this (can't find the original source) and I tho…

And this is an interesting little wrinkle, but one reason for the proliferation of high-frequency trading is to make the quoted spread to be wider than it needs to be. In the presence of predatory HFT techniques people who just want to provide honest liquidity (but who cannot afford 30 FPGA engineers) are forced to either leave the market all together or to provide quotes extremely wide to prevent the HFTs from picking them off (i.e. using information that everyone acknowledges will changes the prices, but doing it half a miscrosecond before you can, and thus forcing you to make a trade at a bad price).

Re: Robinhood S-1 IPO

#372

Post by bern4444 »

s1artibartfast wrote: post #212
bern4444 wrote: post #200

Earlier quoted context omitted.

Its not a good idea to allow heads of massive institutions to just hop around right after their tenure is over. For one, it creates a negative incentive for the regulatory roles. Now people will seek to be head of the SEC just so they can score a specific job after. Incentives are misaligned. Lots of private sector companies (especially law firms) include non-compete clauses for similar reasons. They want to prevent…

>For one, it creates a negative incentive for the regulatory roles. Now people will seek to be head of the SEC just so they can score a specific job after. Incentives are misaligned. I just don't see the misalignment in incentives. Everyone is thinking about their compensation next job, and it is only a problem if being bad at your current job somehow makes you more attractive to your next employer. Unlike the privat…

Think of it this way as well, Robinhood's chief regulatory officer quits and gets hired as head of the SEC. Works as head of the SEC for a few years. Their tenure at the SEC ends and they jump right back to Robinhood.

I have 0 doubt in my mind, anyone in that position wouldn't already be predisposed to believe that actions (regulations, enforcement etc) that help Robinhood (and other trading platforms) are a good thing and will work for those corporate interests because they share the same beliefs by default.

Then, once they leave the SEC, they're welcomed back with massive pay as a thank you for the job they did pushing Robinhood's agenda forward which is at odds with good governance principles.

Its like making the head of Exon the head of the govt's renewable energy initiatives. They're gonna say increasing renewable energy output isn't a worthwhile pursuit, what we really need is more oil. Let's sign a big contract over with exon, I even know the people who work there and can make it happen!

Working against society's interests in favor of the corporations

Re: Robinhood S-1 IPO

#373

Post by stouset »

porb121 wrote: post #356
stouset wrote: post #331

Earlier quoted context omitted.

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?

> Why—exactly—do you reason that someone is willing to pay $109 per user per year for their order flow? Adverse selection is scary and knowing your counterparty is worth a lot. This is not as sinister as you're making it out to be.

In other words, Robinhood is bringing fresh chum to the financial sharks of the world.

How do we reconcile this with the narrative that they’re the good guys delivering wealth generation through investing to the masses?

Re: Robinhood S-1 IPO

#374

Post by lottin »

gruez wrote: post #364
lottin wrote: post #326

Earlier quoted context omitted.

You already had a bond.

That's generally the precondition for selling a bond. I don't see how that's relevant to my previous comment though.

You said you'd use the cash to buy an investment because you don't want to hold cash, but you already had an investment —the bond— which you sold for cash. That doesn't make a whole lot of sense, does it?

Re: Robinhood S-1 IPO

#375

Post by gruez »

lottin wrote: post #374
gruez wrote: post #364

Earlier quoted context omitted.

That's generally the precondition for selling a bond. I don't see how that's relevant to my previous comment though.

You said you'd use the cash to buy an investment because you don't want to hold cash, but you already had an investment —the bond— which you sold for cash. That doesn't make a whole lot of sense, does it?

>but you already had an investment —the bond— which you sold for cash.

And then what? After you sold that bond you're going to stop investing?

Re: Robinhood S-1 IPO

#376

Post by Judgmentality »

gruez wrote: post #320
Judgmentality wrote: post #205

Earlier quoted context omitted.

> I wasn't happy about it but I don't blame them. What they did was illegal, so why not blame them? Robinhood is being investigated for it. Why not blame everyone that's guilty? https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood...

> Robinhood is being investigated for it. Why not blame everyone that's guilty? Because being investigated means you're guilty? I guess a fair and impartial trial is just red tape.

Okay, I think you're missing the point. What they did was illegal. Why would you not blame corporations for financial crimes? They stole money - I have no idea why you "wouldn't blame them" for that.

Sure, if it turns out they didn't commit the crime don't blame them (but there is overwhelming evidence that I have personally witnessed so I already know for a fact that they did this). What I don't get is why this guy is apologizing for theft.

Re: Robinhood S-1 IPO

#377

Post by s1artibartfast »

bern4444 wrote: post #372
s1artibartfast wrote: post #212

Earlier quoted context omitted.

>For one, it creates a negative incentive for the regulatory roles. Now people will seek to be head of the SEC just so they can score a specific job after. Incentives are misaligned. I just don't see the misalignment in incentives. Everyone is thinking about their compensation next job, and it is only a problem if being bad at your current job somehow makes you more attractive to your next employer. Unlike the privat…

Think of it this way as well, Robinhood's chief regulatory officer quits and gets hired as head of the SEC. Works as head of the SEC for a few years. Their tenure at the SEC ends and they jump right back to Robinhood. I have 0 doubt in my mind, anyone in that position wouldn't already be predisposed to believe that actions (regulations, enforcement etc) that help Robinhood (and other trading platforms) are a good thi…

The problem with this view is that SEC chairman is selected by the president, so their values and positions all baked into their appointment. If the president's office wants someone with a more or less favorable position on to trading platforms, they find one. If they don't comport with the government's expectations, they are replaced. Same with the Exon example.

I work in a highly regulated industry and think that the cop and robber idea people have is out of tune with reality witch is more collaborative. Most agencies want businesses to succeed and actively work to help them do so within the confines of the law.

Re: Robinhood S-1 IPO

#378

Post by waych »

wolverine876 wrote: post #338
waych wrote: post #276

Earlier quoted context omitted.

You misunderstand. The information is there, constant, regardless of how many participants are in the market. The addition of new participants helps spread, judge and value the information, more than fewer participants, which allows the information to be better incorporated into the price, resulting in a more efficient (fair value) market. As a result, the asset becomes more liquid and "fairly priced". There is no "r…

We may be confusing market efficiency and economic efficiency. Economic efficiency is about limited assets (money, etc.) being used most productively. The economic value of something isn't arbitrary or whatever the market says; it depends on how productive it is. For example, the market may price Dutch tulip bulbs at thousands of dollars each, but that's not their value nor is it economically efficient to tie up thou…

I'm not confusing them, I'm making a distinction. My posts have been about market efficiency and I didn't say a thing about economic efficiency.

If 1000 new participants wanted to buy and sell rockets, yet, the price would become more "efficient". There would be more sellers and buyers, and more room to negotiate and trade. Your example is a stupid one.

Re: Robinhood S-1 IPO

#379

Post by porb121 »

stouset wrote: post #373
porb121 wrote: post #356

Earlier quoted context omitted.

> Why—exactly—do you reason that someone is willing to pay $109 per user per year for their order flow? Adverse selection is scary and knowing your counterparty is worth a lot. This is not as sinister as you're making it out to be.

In other words, Robinhood is bringing fresh chum to the financial sharks of the world. How do we reconcile this with the narrative that they’re the good guys delivering wealth generation through investing to the masses?

a lot of people have given very thorough explanations of why pfof is not an evil thing in this thread. i suppose you're free to believe your own narrative, if you want.

Re: Robinhood S-1 IPO

#380

Post by lottin »

gruez wrote: post #375
lottin wrote: post #374

Earlier quoted context omitted.

You said you'd use the cash to buy an investment because you don't want to hold cash, but you already had an investment —the bond— which you sold for cash. That doesn't make a whole lot of sense, does it?

>but you already had an investment —the bond— which you sold for cash. And then what? After you sold that bond you're going to stop investing?

I don't know... if you wanted to sell the bond in order to buy stocks or something else, you'd have done that anyway, so it's unclear how the fact that the Fed purchased your bond is making everything to go up in price.
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