SEC charges Robinhood $65M for misleading customers about revenue sources

Re:SEC charges Robinhood $65M for misleading customers about... by treis on Thursday December 17, 2020 @02:54PM (#25459606)

>20/80 is worse than other retail brokerages (virtually all of which do PFOF, because none of them are especially competent at actually executing trades) --- even if you factor in the lack of trading fees,

(1) I don't think you can make a blanket statement about the split and trading fees. If I bought 1 stock for $100 this year I'm better off with the 20/80 split than a trade commission. Conversely, if I bought 10,000 shares @ $100 I would be better off paying a commission and getting a 80/20 split.

It's also not clear what's better for the consumer. If I'm paying a commission then I have to trade sub-optimally in order to batch trades. Maybe I'm better off being able to make a trade for free when I need it even if it costs me more in fees.

(2) This seems like an odd standard. I can take 20% as a rebate because everyone else does, but I can't take 80% because no one else does that. So maybe I can take 25% or maybe 30% or maybe 35% and that's ok. Where exactly is the line?

And if someone launches a competitor called Jesse James and they take 80% does that mean Robinhood is now ok? Or is two not enough? And if two is not enough then how many does it take?

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Re:SEC charges Robinhood $65M for misleading customers about... by tptacek on Thursday December 17, 2020 @03:34PM (#25460035)

I'm literally quoting the SEC here. 80/20 wasn't an example I came up with for funsies. They did the math; the outcomes were worse for RH customers. Which seems like it would have been OK, except that RH said the opposite thing in its promotional material.

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