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Robinhood may abandon main revenue stream

Inventory managers and crypto app trader,  Robinhood promised in the coming months, to diversify its sources of revenue and expand its call for the users of cryptocurrency.

Image Source: Fortune

Better get on that.

U.S. President of the Securities and Exchange Commission Gary Gensler said in an interview with Barron’s published today that the agency plans to ban a practise called payment for order flow. Trading in HOOD shares then fell because traditionally the bulk of the revenue was accounted for by payment of the order flow.

Payment for order flow

Payment for order flow, sometimes shortened to PFOF, entails outsourcing the execution of stock trades to third parties. When someone buys a stock on Robinhood, another company pays Robinhood fractions of a penny per share to match buyers and sellers. (Not bad when you consider Robinhood processes millions of trades in a year.) Using complex price data, these market makers can execute the trade more efficiently than Robinhood could and take a cut of the resultant proceeds.

Robinhood can commercialise without a commission. It’s like that. And not necessarily bad. And not bad. The brand Robinhood can commercialise without a commission. It’s like that. And not necessarily bad. And not bad. Market manufacturers provide liquidity that enables affordable trade. They can even improve Robinhood’s trading prices as they have to be capable, at least in line with what is called National Best Offer and Bid, if they do not beat orders placed on a US bond directly (NBBO).

But some say that market makers actually increase overall prices by preventing exchange trading and increasing trade spending (bad for traders).

In addition, other companies say the data received from market makers will over time reduce competition when other market makers are best priced, leading to higher spreads. Gensler agrees that if all these data were public, it could be better.

“They get the information, they get the first look, buyers and sellers match that flow of commands,” he said. “That couldn’t be the 2020 markets most efficient.”

Robinhood CEO Vlad Tenev has remained dedicated in his Q2 anniversary to a variety of new product additional products including a crypto wallet and more trading cryptocurrencies. The seven coins listed are the main source of the company’s non-PFOF revenue. Robinhood revealed that for the first time, 60% of its accounts containing funds began to trade cryptographical cryptography sufficiently to generate cryptographic revenue, representing 41% of overall revenues — up of 17% in the preceding quarter. Of this, however, 62% came from Dogecoin alone.

And if you have a difficult regulatory condition for the payment for orders, you probably don’t want Dogecoin, created as a joke, to be your only bailout.

 

 

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