Robinhood facing SEC investigation over dealings with trading shops

[bitcoinst]

WSJ: Robinhood facing SEC investigation over dealings with high-frequency trading shops

Popular millennial stock and options brokerage is said to be under civil fraud investigation into its failure to properly disclose how it routes client orders to high-frequency trading shops, according to The Wall Street Journal.

Per the report, the investigation — conducted by the Securities and Exchange Commission — is in an "advanced stage" and could result in a $10 million fine. Robinhood makes a good portion of its revenues through a practice known as payment for order flow. Under a PFOF deal, a broker will sell off client order flow to high-speed traders like Citadel Securities, which internalizes and matches the orders.

A deal could be announced this month and "the two sides haven't formally negotiated a proposed fine," according to the Journal.

Robinhood has previously been slapped with fines relating to its order routing practices. At the end of 2019, FINRA announced  a $1.25 million fine against Robinhood for improperly routing orders.

https://www.theblockcrypto.com/linked/76781/wsj-robinhood-sec-investigation


They will pay fines and keep working.

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[The Sceptical Chymist]

They will pay fines and keep working.

Sure, but it doesn't sound like any kind of earth-shattering infraction on Robinhood's part, else the proposed fine wouldn't be so low.  That "order flow" information piece that Robinhood makes money from is the main reason other online brokers now don't charge commissions on trades, so I personally have nothing against them. 

There are probably a lot of millennials on here who've just gotten started in trading crypto/stocks, and they might not remember a time when it cost at least $7-8 to place a trade with a broker like E-Trade or Scottrade (now TD Ameritrade).  And it was waaay worse years before that when you had to pay a commission that was a pretty high percentage of your trade amount.  Somehow Robinhood came along and now I can buy stocks with no commission--that's like a wet dream for someone like me who can't afford to waste money on commissions.

It's too bad Robinhood doesn't let customers deposit crypto into their accounts as if it was cash.  They advertise that you can buy and sell bitcoin on their platform, but you're really not owning any of it and I wish it wasn't that way.  Pretty sure the US government doesn't want Robinhood to become a money laundering site and thus won't allow them to do that.