https://www.zerohedge.com/news/2018-09-15/robinhood-investing-app-makes-millions-selling-users-data-

[d08]

IB liquidates exchange traded spreads(1-2 cents wide) using the outright futures(5-10 cents wide). I've heard similar stories re: ops. What reason is there for this other than profit off the liquidation? Certainly IB knows what products have exchange traded spreads/combos. IB may not be a bucket shop but its practices are deeply geared towards their own profit book. Nothing wrong with that either just don't be fooled by the mantra that the autoliq is there to protect customers. I won't even get into their margin practices or this latest daily exposure fee which is a straight up theft IMO.

I didn't know that as I don't trade spreads. I agree that their autoliq is quite insane and needlessly strict, people who keep on repeating that "it's to protect customers" are delusional.
Then again, I have never been with RH, I suspect their autoliq isn't any better.

 

[aquarian1]

Bucket shop? How exactly?

They trade against their own clients ("internalizing the trade") and taking edge off both sides.

 

[GRULSTMRNN]

This is not the issue here at all. I have zero interest in this company, I pay my commission with my brokers fair and square. But what rubs me the wrong way is how I come across more and more people who always excuse wrongdoing with laughable rational. Sure, everything would be fine if this broker disclosed what they are doing. If they did then all is good. If not then they should rightly be reprimanded or have a penalty imposed or even shut down. Why excusing wrong behavior? If someone gives you a candy for free that is poisoned do you also excuse that person?

There are no free lunches. At the end of the day, it is still a business created to generate profits for its owners. Who like to work for free? So, why do you expect something from nothing? Either it is a pretty bad service or they are nickle and diming you or both!

 

[GRULSTMRNN]

Only in Russia perhaps. In developed nations there are rules and regulations.

All brokers do the same thing. It is called protecting your monies. Nobody is going to let you use and lose their monies and not pay for it!

 

[GRULSTMRNN]

That exchange minimums are often too low in times of stress has been shown by a number of firms going belly up. I am happy you like your current broker. I have IB, among others and am happy with their business model. I agree their system is not perfect but do you have a better idea during market stress what to do. I agree that a call or email should be a must prior to any forced liquidation.

.. I completely understand the notion of margin and you're responding is if you're explaining the basic concept to me.. the deal is that most Brokers go by exchange minimums for margin.. but interactive brokers when the market goes wild raises their margins way higher than exchange minimums....

 

[GRULSTMRNN]

Well, it does depend on how those orders get filled. If execution related cost (non commission cost) vastly exceed the perceived benefit of not paying commission (which can easily happen) then this broker should disclose that. Apparently that degree of reporting has not happened. So, without knowing more details than you do I would at least say "it depends". Just because something is seemingly "free" does not justify it being poisoned right?

Why is this news again? Of course they sell their order flow, they have since day 1, they've disclosed since day 1, and anyone with an iota of understanding of what a for-profit enterprise is would realize that a company has to have a source of revenue to remain a going concern! Once again, zerohedge to the rescue with the blindingly obvious!

 

[GRULSTMRNN]

I prefer to be delusional if it means that my account is safe even during highly volatile times whem other brokers go belly up because they can't shoulder the negative account balances their insane clients caused and can't cover.

I didn't know that as I don't trade spreads. I agree that their autoliq is quite insane and needlessly strict, people who keep on repeating that "it's to protect customers" are delusional.
Then again, I have never been with RH, I suspect their autoliq isn't any better.

 

[GRULSTMRNN]

An internal cross benefits all sides, including the customer. If you want a piece of the cake from IB then write them a letter.

They trade against their own clients ("internalizing the trade") and taking edge off both sides.

 

[ajacobson]

Portfolio Strategy
Robinhood Is Not The Villain It's Been Made Out To Be
Sep. 12, 2018 10:47 AM ET
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48 comments


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Includes: AMTD, ETFC, FB, SCHW

Treading Softly

Dividend investing, REITs, dividend growth investing, master limited partnerships

(1,226 followers)
Summary


When an order is submitted, brokerages have multiple choices of how to benefit from it.

Brokerages will try to internalize as many orders as possible.

Robinhood internalizes none of them but moves to the second step.

Robinhood the Villain, Revealed!
A recent article here on Seeking Alpha claimed to expose shady tactics within the SEC disclosures by Robinhood versus other brokerages. The Author claims Robinhood is making millions off of "selling out" their investors - who are particularly millennials. This was painted as shady and underhanded - Robinhood isn't living up to its name since its getting kickbacks from High Frequency Traders, HFTs!

This article contains a fatal flaw, it seems to misunderstand, or misrepresent the flow in which brokerages will process orders to extract profits from them. Robinhood does not claim it will not flow the same processes that E-Trade (ETFC), TD Ameritrade (AMTD), or Charles Schwab (SCHW) follow.

Let's review the SEC allowed and mandated process that your orders flow when you submit them to your brokerage to execute them.

From Submission to Completion

Source: SEC

According to the SEC, when you submit an order - market or limit, your brokerage has multiple options seen above in this somewhat dated graphic.

1. The brokerage can send it directly to a stock exchange
2. The brokerage can send it off to a "Market Maker." What are Market Makers? These are where those accursed High Frequency Traders fall! These companies pay a small fee to brokerages to get a first look chance to make accept your order prior to making it to the exchanges. We'll cover HFTs in detail further below.
3. Electronic Communications Network is the third choice. It is designed to relay orders directly between brokerages - cutting out exchanges and is primarily used for limit orders.
4. The brokerage can internalize the order. This means the brokerage matches buy and sell orders. This method we'll discuss in detail further down.

 

[smallfil]

This is not the issue here at all. I have zero interest in this company, I pay my commission with my brokers fair and square. But what rubs me the wrong way is how I come across more and more people who always excuse wrongdoing with laughable rational. Sure, everything would be fine if this broker disclosed what they are doing. If they did then all is good. If not then they should rightly be reprimanded or have a penalty imposed or even shut down. Why excusing wrong behavior? If someone gives you a candy for free that is poisoned do you also excuse that person?

Not excusing wrong doing. If you feel someone has violated the law, you should go forward and file a complaint with the SEC. That is their job to investigate and prosecute those guilty of violating securities laws. By the same breadth, you know how much you have in your account, if you borrow someone else's monies and are irresponsible by your actions resulting in losses, shouldn't you be required to be held accountable as well? Allowing that puts the other accountholders at risk if the broker goes under because of it. Just my 2 cents. Laws should apply to everyone, both traders and the brokers alike!