Re:Robinhood was indeed too good to be true
by greenshackle2 on Wednesday December 23, 2020 @11:57AM
(#25519550)
There is nothing wrong with the Payment For Order Flow model. Virtually every retail broker does it.
What you're missing is that Robinhood is not the only commission-free brokerage. I'm sure you'd rather have no commissions and 80% of the price improvement instead of no commissions and 20% of the price improvement.
The real problem is that Robinhood advertised they have THE BEST EXECUTION compared to other brokers, set up a Committee to ensure they have THE BEST EXECUTION, and then that Committee somehow failed to notice that Robinhood clearly doesn't have THE BEST EXECUTION because they're taking an 80% cut of price improvement, instead of 20% like everyone else.
What you're missing is that Robinhood is not the only commission-free brokerage. I'm sure you'd rather have no commissions and 80% of the price improvement instead of no commissions and 20% of the price improvement.
The real problem is that Robinhood advertised they have THE BEST EXECUTION compared to other brokers, set up a Committee to ensure they have THE BEST EXECUTION, and then that Committee somehow failed to notice that Robinhood clearly doesn't have THE BEST EXECUTION because they're taking an 80% cut of price improvement, instead of 20% like everyone else.