What is the catch with Robinhood?

1. Your broker can only route to a trading venue. You can't route direct to Citadel, but if you are on Citadels smart router it will choose where they want it routed and this will depend on your deal with Citadel. It can go to any number of trading venue
2. Smart routers will route to a lit or dark environment.
Most firms will smart route to a MM on the venue they choose.
3. If that MM is not at the NBBO they either most move to NBBO or ship to the NBBO - very little ship.
4. You can price improve the NBBO and this most likely to occur in a nonpayment environment
5. With very rare exceptions you can't violate NBBO and the order can't sit at the venue if a superior market exists as it will ship to the superior market.
6. HFT and what you see as quotes being lifted ahead of you has more to do with private feeds and an antiquated SIP - non PFOF orders get just as poor treatment.
7. The father of the modern Intermarket Trading System was Bernie Madoff.
 
Wall Street Journal
September 2, 2020

Robinhood Markets Inc. faces a civil fraud investigation over its early failure to fully disclose its practice of selling clients’ orders to high-speed trading firms, people familiar with the matter said.

The investigation is at an advanced stage and the company could have to pay a fine exceeding $10 million if it agrees to settle the Securities and Exchange Commission probe, one of the people said. A deal, however, is unlikely to be announced this month, the people said, and the two sides haven’t formally negotiated a proposed fine, the person said.

A Robinhood spokeswoman declined to comment on the investigation or any talks with regulators, but said: “We strive to maintain constructive relationships with our regulators and to cooperate fully with them.”

An SEC spokeswoman declined to comment.

The probe is the latest headache for the upstart brokerage firm that was founded in 2013 and has developed a hugely popular app that allows individuals to trade stocks, options and cryptocurrencies without paying any commissions. While Robinhood has seen phenomenal growth this year, the Menlo Park, Calif.-based firm has faced setbacks such as outages that prevented customers from trading, the cancellation of its plans to expand to the U.K. and fallout from the suicide of a 20-year-old Robinhood customer who thought he had lost money from a sophisticated options trade.

The investigation, run out of the SEC’s San Francisco office, examined Robinhood’s failure to fully disclose on its website—until 2018—that it took payments from high-speed trading firms for sending them customers’ orders to buy or sell stocks or options, the people said. The practice, known as payment for order flow, is a common—if controversial—way for retail brokerages to execute client trades. Critics say payment for order flow creates a conflict of interest for the broker that sells the orders. The practice has raised suspicions that it could lead to sophisticated traders exploiting mom-and-pop investors, although brokers and traders say such concerns are baseless.
 
bone said:
The point being, that CALPERS and Black Rock and Citadel and the Stanford Endowment Fund aren’t using E*Trade or Bob’s Zero Commissions Trading App for a reason.
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Calpers is broke and Stanford's fund returned 6.5% last year when the S&P was up 30%. I suspect the average ETrade or RH account was up a lot more than pension funds last year. If these stupid university and pension funds just invested in 50/50 QQQ + FANG, they would not have any funding issues for a while.
 
helpme_please said:
Can using only limit orders help retail clients of Robin Hood avoid lousy fills?
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Yes. Whenever you place a limit order, you are guaranteed to get that price or better or you don't get filled. Then the only difference in that situation vs. a fee-based broker would be if the price only touches the limit price. Then you might not get filled while you might have been filled had you used a fee-based broker. Honestly, I'm not that good. I can never call the top or bottom of the day to the penny and if I do, then it was only by coincidence.
 
bone said:
They are bespoke omnibus accounts, and they will offer custom margin offsets which is amazing. For example, you could buy 500K share blocks of equities out of a dark pool and hedge them against ES and NQ futures, that type of thing. And they would calculate a margin offset for you.
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Where can I learn more about these custom margin offsets? I've been trying to get access to something along those lines, but it seemingly doesn't exist at the retail level.

Are the custom margin arrangements negotiated on a customer-by-costumer basis? I.e. do you sit down with a prime broker, tell them what investments you're planning, and then they have their analysts run a bunch of models and tell you what margin levels you'll be approved for, and for what instruments?
 
If all the brokers are selling order flow, what's the point of even caring about it?

There is no avoiding it, you're just going to have to take a hit on the spread and get front runned. It's either that or don't day trade.
 
RGLD said:
If all the brokers are selling order flow, what's the point of even caring about it?

There is no avoiding it, you're just going to have to take a hit on the spread and get front runned. It's either that or don't day trade.
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All the brokers are not selling order flow, and no serious day trader would actually use one that does, all the big day traders you see on social media use direct access brokers.
 
realtrades said:
All the brokers are not selling order flow, and no serious day trader would actually use one that does, all the big day traders you see on social media use direct access brokers.
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Can you name s few? Whats are they charging?
 
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