Yes, exactly. That's what this submission and charge by the SEC is all about.

Is everyone just forgetting the entire purpose of this submission is that Robinhood used pay for order flow to facilitate front running?

All the press release says is:

>Robinhood failed to seek to obtain the best reasonably available terms when executing customers’

That could mean pretty much anything.

I disagree that your sentence fragment is all the press release says. I believe the press release says a lot more, such as Robinhood making substantial amounts of money from pay for order flow and Robinhood executing orders at prices that are not only worse than what is available on the market, but also worse than competing brokers, and this in spite of the fact that Robinhood advertises this to the contrary.

These facts taken together can not be used to "mean pretty much anything". These facts, along with the additional fact that the SEC is charging Robinhood of engaging in illegal activity, strongly suggest illegal activity involving pay for order flow that resulted in worse price execution to the customer.

If you think that means "pretty much anything" then we can simply agree to disagree on this matter.

> Robinhood executing orders at prices that are not only worse than what is available on the market, but also worse than competing brokers

This sentence doesn't make much sense given how PFOF works. It would make sense if it were flipped around and said "not only worse than competing brokers, but worse than what is available on the market" because brokers typically provide retail traders better than what is available on the market (assuming: public exchanges = market).

I agree with GP that the press release suggests that Robinhood was not giving worse prices than NBBO, but was instead giving prices better than NBBO (like every broker), but intentionally not _as good_ prices as other brokers, in exchange for greater PFOF.

I am not fundamentally against PFOF, but the "honesty" required on the part of the broker in situations like this has always troubled me, and it's interesting to see it rear its head. I think an ideal market structure might keep PFOF, but in a more public way, such that payments were more transparent/competitive in real time, and not something arbitrarily negotiated between brokers and wholesalers.

Front running is a very specific malfeasance, and this release does not accuse Robinhood of it, by name or otherwise.

Despite what many apologists claim about front running being this very specific and formal type of activity that never happens because it's illegal and no one involved in finance ever commits crimes, the reality is that front running is not a technical term, neither in law nor in any academic or formal financial treatment.

Front running is an informal term that is used in many different domains to refer to when a principal acting on behalf of a client uses privately obtained information gained from that client to benefit at the client's expense. The term is used in finance, it's used in real estate dealings, heck there was even a scandal involving domain name registrars front running their clients:

http://www.circleid.com/posts/81082_network_solutions_front_...

The more formal and academic term is the principle agent problem:

https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...

> the reality is that front running is not a technical term, neither in law nor in any academic or formal financial treatment.

There is literally a FINRA rule with with front running in the name (5270). It doesn't have to be a technical term for it to still have meaning (outside of Michael Lewis's intent to change its meaning). It specifically refers to a broker trading based on the knowledge of their client's intent to trade. The examples you give actually are instances of the true definition. It doesn't really happen in equities because of how automated and smooth that market is, but it certainly happens in other areas of finance.

The principal agent problem is much more general.

That's not what they charged with. What they charged with:

- You trying to buy 100 shares for $100 each - Someone is selling 100 shares for $98 each - RH supposed to fill order at best price ($98) - RH didn't do that.