Re:Robinhood stock trading app confirms $110M raise at $1.3B...
by hn9780470248775 on Thursday April 27, 2017 @01:11AM
(#14209326)
Why?
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Re:Robinhood stock trading app confirms $110M raise at $1.3B...
by scott00 on Friday April 28, 2017 @11:30AM
(#14220201)
Because, for the most part, retail investors are not well-informed investors and are willing to cross the bid-ask spread. To simplify dramatically, suppose Citadel thinks the fair value of a stock is 25.185, the market is 25.18-25.19, and a Robin Hood customer wants to pay 25.19 to buy 1 share of the stock. If they buy from Citadel, Citadel makes $0.0050 on average. Given those basic economics, it makes sense for Citadel to pay, say $0.0018, to make sure that the Robin Hood customer buys from them instead of from Knight.