In any case, it really doesn’t matter. It’s awful at order execution, so you get worst prices on things. This was proven but SEC just gave slap on wrist.

Its an extremely immature platform and has outages at the worst times.

It’s app is simple but missing key info compared to competitors.

Finally, the GameStop fiasco was unforgivable and only a naive fool would accept the explanation given. Citadel is the MAJORITY of Robinhood revenue and was opposite that trade. The stock market has existed for over a century with online trading for decades, including many volatile stocks, and apologists can’t name a single other example of one way trade restrictions. It didn’t happen during the Volkswagen short squeeze.

Despite that, apologists act like the clearing house explanation is stone cold fact. Source? Not a single investigation other than the word of Robinhood CEO, who contradicted himself multiple times explaining it. It was the fraud of the century and only people with little understanding of finance bought the explanation.

Only someone who doesn't understand how any of this works would believe these absurd conspiracy theories.

1) Citadel is one of FIVE of wholesale market markets RH use. Even if they did refuse to accept orders for GME, why wouldn't their four main competitors not happily accept them if it meant blowing up the biggest player in the field? They have no incentive to help Citadel. In fact, they have a clear financial incentive to do the opposite.

2) Why would RH care if Citadel went away? Citadel is one of their five 'suppliers' if you will. If Citadel disappeared overnight, RH would just route their order to the others. It makes absolutely no difference to them. They just route to whoever currently pays the most for orderflow.

3) RH customers are extremely small players with next to no capital between them. Cutting them off makes no difference, because it was professionals with real money driving the squeeze at that point. They recognised that they could make a ton of money, and put a bunch of competitors out of business in the process, so they kept hammering the stock.

4) The claim that Citadel itself even had a GME short position (beyond their MM inventory) is baseless. Citadel Advisor's previous 13F filing shows that they were outright LONG GME stock, were LONG GME calls, and were LONG GME puts. So while those puts will have lost money, the other two positions will have GAINED MASSIVELY during the squeeze. Their short exposure was mainly via the money that they lent to Melvin Cap during the squeeze.

In 2020, 34% of their revenue came from Citadel. 75% of their entire revenue stream comes from forwarding their clients' orders to one of FOUR market makers like Citadel. This practice in and of itself is contentious, and they readily admit this in their risk factors section of the filing.

They also readily acknowledge the absolute thrashing they would receive financially if even one of the four market makers decide to not do business with them.

Of these four, Citadel is the largest.

>Message board people believe a lot of weird things about how markets work.

Message board people also love reading comments and not looking at the articles they're typically commenting about.

RH stopping all GME purchases was market-moving news and citadel got to know before anyone else, to the detriment of those RH users that were long GME.

Yes, that is the point of paying for order flow. That is doubtless why RH users don't pay commissions.

Losing PFOF from Citadel alone means kissing away more than 5% of their _revenue_. With essentially no cost associated with PFOF, these payments account for a large portion of their profit.

I wasn't happy about it but I don't blame them. As much as people were talking about over 100% of GME shorted, I can't imagine how much margin on top of margin people were trading while there options had yet to be settled. If anything the issue should be how long it takes a trade to settle.

[1]https://markets.businessinsider.com/news/stocks/robinhood-we...

These institutions were limiting the quantity that users could purchase, not necessarily halting the options.

Robinhood has been self clearing for years before the GME incident

What they did was illegal, so why not blame them? Robinhood is being investigated for it. Why not blame everyone that's guilty?

https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood...

Because being investigated means you're guilty? I guess a fair and impartial trial is just red tape.

Sure, if it turns out they didn't commit the crime don't blame them (but there is overwhelming evidence that I have personally witnessed so I already know for a fact that they did this). What I don't get is why this guy is apologizing for theft.

You think that what they did was illegal, but the person you initially replied to (https://news.ycombinator.com/user?id=adabyron) only said he "wasn't happy about it". That's not the same as "apologizing for theft".

>but there is overwhelming evidence that I have personally witnessed so I already know for a fact that they did this

do share.

I'm guessing you're aware of the trading halts in January and are arguing that's legal (or at least remain unconvinced it's illegal). Rather than have a long argument about whether or not brokers were legally entitled to restrict trading, I'll just concede as it really wasn't the point I wanted to make. I'm not a lawyer, there is nuance in the legal system, blah blah blah. I could go down the GME rabbit hole but nobody gives a shit. I think of it more like when a cop gets away with murder in our legal system. Did he commit a crime? Well, technically no, because our legal system said so - but I still feel comfortable calling him a criminal. Likewise, nobody in the US went to jail for the 2008 financial collapse, so I guess nobody committed any crimes.

But that's me moving the goalposts, making appeals to emotions, and just generally making a very weasely argument. My frustration is with people so willfully absolving others of guilt. I feel like the way to make the world a better place is by holding people accountable for their actions, instead of just chant it as some bullshit mantra at another dumb tech startup that provides no real value to anyone. Obviously other people have different perspectives and may not have seen any wrongdoing in what happened. Everyone is entitled to their beliefs. And I'm allowed to think people are ignorant and morally bankrupt for the beliefs they hold.

So you're right, but I don't care because that's not what matters.

Insofar as "I don't think they're guilty", yes. This is a slightly lower bar than "I think they're innocent", because the former covers cases where you're unsure. Maybe the person you replied to actually thinks robinhood is innocent beyond a reasonable doubt, but that can't be confirmed via his comments.

> I think of it more like when a cop gets away with murder in our legal system. Did he commit a crime? Well, technically no, because our legal system said so - but I still feel comfortable calling him a criminal

This analogy only works because you can presuppose that the cop is guilty. It breaks down when you can't. For instance if you only knew that he shot and killed someone. Maybe he acted in self defense (the actual kind).

My understanding of the situation was that robinhood was forced to restrict trading for meme stocks due to increased deposit requirements on them. If they couldn't come up with money to meet deposit requirements (due on the day of trade), then they have to halt trading. Meme stocks like GME had disproportionately higher deposit requirements, so restricting those stocks would allow them to continue operating with the smallest impact. If those stocks weren't restricted, they would have burned through their cash/credit they had (to meet deposit requirements) and would have to halt trading anyways.

Now, this is what robinhood is claiming, and I can't verify every single detail of this story (although some elements were independently confirmed, like the deposit requirements going up). Maybe robinhood had a boatload of cash/credit on hand and could have easily met the day/week's trading volume, or maybe it would have been close and they didn't want to risk it, but you think they should have went ahead anyways. In any case, the whole situation is less clear cut than the standard villain narrative of "they shut down trading because the hedge funds told them to". More importantly, there's enough wiggle room for differences of opinion that if someone says "I can't blame robinhood", you don't have to immediately accuse them of "willfully absolving others of guilt".

Immediately after halting trading, Robinhood's initial public statement was "we have full liquidity for any event and that is not the problem." This is where it starts to become fraudulent, because that contradicts what they later said. Timelines matter, details matter, and you are correct that the court of law has its place for this sort of thing. I'm convinced they were willfully lying at this point, but it would take a long time to explain why in a convincing manner (so I don't blame you for not believing me here).

Now afterwards is when shit gets weirder, but the GME rabbit hole is really deep and the signal to noise ratio is atrocious. There is some good data from Robinhood's S1 filing though. For their transaction-based business, Citadel made up 27% of their revenue - which is significantly higher than anyone else. And last quarter 81% of Robinhood's revenue was for PFOF, payment for order flow.

I agree with you this should go to court and I look forward to it. I could provide you with plenty more data and evidence, but it's lots of little pieces and admittedly a lot of it is circumstantial. In other words, I'm doing a shitty job explaining my side and you don't have much reason to believe me.

I owe you and the person I originally responded to an apology.

On the spot! Robinhood has made it so easy to trade that I have seen many people trading from their mobile while having a coffee or commuting! I would really like to see all these "traders" in 5/10 years ... if it is true that 80% of day traders loose money .. I bet tons of improvised traders will learn a very expensive lesson.

I don't do trading, I simply don't have time to fully look into companies balance sheets etc. I buy index/mutual funds , I might have missed the meme stocks but I am happy with my steady growing investments, compounding effect works great!

Index funds are for my retirement account, it's fun to have a brokerage account and trade with it as a hobby. It's been very profitable so far but I don't expect that to continue.

I'd imagine day trading has a much higher return than buying lottery tickets or gambling at a casino for example.

I don't like Robinhood and don't feel any need to apologize for it; I think they're predatory. But this isn't why.

"Fraud of the century" is pretty funny, though. Kudos.

There's little chance that the Big Four banks in Australia were all part of a conspiracy to ripping off investors, at least in regards to GME (they're too busy ripping Aussies off via their superannuation).

I'd welcome an investigation, but based on the rest of your comment ("apologists", "only a naive fool would accept the explanation given") my guess is that your mind is already made up.

Here’s an excerpt from the linked article:

> The company also said it is under investigation by a series of regulators, state attorneys general, the SEC, and the U.S. Department of Justice in proceedings associated with the trading restrictions; the company said its CEO Vladimir Tenev has also had his cell phone seized by federal attorneys.

A CFO of a multimilion dollar company gave me the same explanation independently before Robinhood gave any statement.

The reality is unless you have an algo trading system or are a long-term investor you are going to lose on day trading in the long run. RH has done a great job of making trading easier for the masses; I'm not sure the net outcome is a good one.

I think you'll find that the opposite is the case.

Personally, I've never invested less than $2000 in a single lot. I also aim to have around $5000 cash in my accounts, more than that is a waste, and less puts me at risk of being unable to pay for things.

https://www.stockbrokers.com/guides/order-execution

Also here's the disclosure from IBKR, which is probably the polar opposite from robin hood in terms of favorable order execution

https://gdcdyn.interactivebrokers.com/Universal/servlet/Regi...

I know the first link said fidelity is better, but that's fidelity vs ibkr-lite, not ibkr-pro.

That people can get benefits from the stock markets? Or that investment/economic decisions van be made democratically?

Index funds rely on the the folks making the index to determine which stocks get bought -- who's on the s&P 500 is not a democratic process

It seems that in the 1900s the American Dream shifted to mean: get a job, buy a house, have kids, don't take risks, trust in the system and the system will support you.

Now in 2021, it's more like: get a job to ensure you don't go bankrupt from stupid high healthcare expenses, your employer will keep all the profits and shift all the risks onto you, and if you're moderately lucky and live in the right place, you won't be homeless.

I don't know how I feel about publicly traded stocks or the stock market, but I can't help but feel like "index funds democratized investing" is like saying "the 9 to 5 job democratized the American Dream".

We don’t give Robinhood crap because it’s “not sophisticated enough”. We do so because they have removed the guard rails, encouraged the some of the riskiest possible behavior (with a particularly poor risk:reward ratio), abrogated any responsibility of steering their users toward financial literacy or sound investing practices, and done all of this toward one of the most vulnerable classes of market participants.

Day trading is not investing. It is to investing as predicting the weather is to predicting the climate. Getting masses of lay people “comfortable” with day trading is—frankly—unmitigated evil. It is a means by which the rich will get richer and the poor will have their money fleeced. The only reason this hasn’t unfolded in complete disaster yet is the absolutely unprecedented bull market we’ve been in. It will end—nobody knows when—but when it does, Robinhood’s customers will be amongst the worst off.

We know this because repeated evidence has proven conclusively that one’s market returns are (on average) inversely proportional to the number of trades one makes. Buying and selling in the short-term maximizes the asymmetry between you and better-informed market participants. Buy-and-hold minimizes this, but that’s not even remotely what Robinhood promotes. Vanguard on the other hand actually did democratize long-term buy and hold investing, which is what we should be steering lay people towards.

You have no idea how many of my friends I've tried to explain this to. I try to explain that day trading is as much of an investment as betting on horse or dog races, but I think a lot of my mates also see those as legitimate expenses.

Obviously while I see the above as a lot of great things, in the wrong hands people can do a ton of damage to themselves with margin, options or trading risky stocks. Robinhood, at the demands of critics, has been improving their information in their UI to help people better understand the risks. And yes, their bash the button to get early crypto access shall never be forgotten & always be a tarnish.

The Robinhood app is far better than anyone else out there for your average investor. ThinkorSwim is the only thing even close & it's far to complicated for most. Otherwise Robinhood is faster, cheaper, better info & overall better user experience. The other companies have all been incredibly behind times, as financial companies are known for.

Side Rant: Robinhood wasn't the only one to run into GameStop issues. There are some people who believe the whole GME debacle was very close to having huge negative implications on the entire market that were going to hurt everyone, whether in the trade or not.

Robinhood made it fancy and hid the complexities of investing so they could turn investing into a gambling platform.

"The wrong hands" is the average retail investor. The philosophical debate is whether those people should be allowed to waste their life savings because they should know better, or if the government should make efforts to ensure that they can't.

In Spain, banks have allowed to trade on all kinds of assets for ages. Some with low fees. If you wanted to buy a certain asset you could do so in like three clicks.

In the US I know as a fact that some banks like Charles Schwab have also made retail investing accessible for ages…

Robin Hood has “democratized” trading in the sense of aggressively expanding it through marketing, maybe a cool UX (I wouldn’t know), but otherwise I don’t see how it has innovated significantly in the area of retail investing.

Like a sibling commenter is saying it has also popularized day-trading more than anything. The math about day-trading is unequivocal and it may very well be that popularizing this is a net loss for society, or at the very least (yet another?) mechanism for transferring wealth from the middle class to sophisticated elites (I mean, this wouldn’t be a loss if you believe it’s stricly a zero-sum effect, and that wealth is just as well in either set of hands)

To be clear, I may have moral qualms with RH and the popularization of day-trading, but I do believe in free market economics and I think it should exist - I can only hope that in time regular folk become educated about investing and that my transfer theory doesn’t come to fruition.

I’m all open for counterpoints on both my claims that it hasn’t done all that much for democratizing retail investing and that day-trading for the masses may be a bad proposition.

I was helping a friend open an IRA with Schwab the other day. After you sign up, it just plops you into their dashboard with no instructions at all. Search function was useless, actually took tons of clicks for me to figure out how to fund the IRA and invest it in an index fund (for example, the list of target date funds isn't found anywhere on their menus, I had to google and use their secondary fund site to find the symbol).

Basically they sure didn't make it easy or accessible for new users, where as with Robinhood it is immediately obvious how it works (I know Robinhood doesn't have IRAs but the patterns for regular investing with other brokers are similar levels of clunkiness)

I'm using Degiro for stocks.

BBVA has a standard broker that charges about 5€ per trade and also a trading platform called Trader with different conditions.

Bankinter has had a standard broker for ages - some people in my family are pro investors and they’ve been using since the 00s.

Both have a massive selection of funds on top of stocks.

Democratising trading is not inherently good, similar to democratising gambling.

I get the desire to stop commercial banks from gambling YOUR savings. But why shouldn't you be able to gamble your own savings if you want to?

Similarly, I'm all for drinking alcohol yet wouldn't cheer for an innovation that would make people drink more.

----

That being said, I think that RH (and many other platforms) do in fact democratise investing (and that's great).

Many countries ban advertizing for cigarettes. So while it's not banned the cost on society and public health is large enough that it's worth restricting advertizing.

I realize that likely seems totally weird for US folks, but that's really not weird at all in Europe. Same as regulating advertizing targeting kids, etc.

On a large scale, eventually lots of people will be hurt. Everyone thought they were having lots of fun in 2007, and then people started jumping out of buildings. Those people had family and friends. Many of the young people in the market right now have never seen or gone through that, and if they keep preaching 'stocks only go up' while trading on 40x margin, they will eventually find out that stonks sometimes go down.

What exactly is Robinhood's product? It's certainly not the newly-minted traders -- their orders are "free". If you follow the money, it looks like it's mostly Pay For Order Flow (PFOF). I wonder why giant market-making hedge funds would pay for that order flow... Another tech faustian bargain.

It really isn't. They're making money off the spread (eg. $105.01 bid vs $105.02 ask), which exists regardless of PFOF (regulation NMS mandates that the price be better or equal to NBBO). The reason why they want retail flow is that it's mostly "uninformed" and they're less likely to get run over.

matt levine explains this in detail: https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...

>I like to tell a fairly textbook version of that story. Market makers stand ready to buy or sell stock from or to customers; they try to buy for a bit less than they sell at, and pocket the spread. If you go out into the market and say “hey I’ll buy anyone’s stock for $10,” and a really smart hedge fund comes to you and sells you stock for $10, that’s probably bad. You’ve probably made a mistake. The hedge fund is selling you the stock for $10 because it knows it’s worth $8. This is called “adverse selection.”

>More subtly, if a really big mutual fund comes to you and sells you stock for $10, that also may be bad. The mutual fund is probably selling lots of stock, because it’s so big; it sells you a little, then sells a little more, then a little more, until it pushes the price down to $8. The mutual fund isn’t necessarily smart, but by virtue of being big and doing big trades, it moves the price; if you are on the other side of its trades, you get run over. This is also a kind of adverse selection: You buy at $10 and are stuck selling at $8. Part of the spread that market makers earn in public markets—the difference between their buying and selling prices—compensates them for adverse selection, the risk of being run over by a counterparty who knows something they don’t.

>Market makers, the textbook theory goes, would much rather trade with retail orders. Retail investors generally don’t know much, so if you buy stock from them you’re probably not making a mistake. And retail orders are generally small and uncorrelated: One investor buys a little, another comes along a moment later and sells a little, it’s all pretty random, and you’re not facing an avalanche of steady sell orders that push the price down. Trading with retail is so nice that market makers—wholesalers—will both give retail orders a tighter spread (pay more to buy their stock, charge less to sell stock to them) and pay their broker for the privilege of doing it.

> Our PFOF and Transaction Rebate arrangements with market makers are a matter of practice and business understanding and not documented under binding contracts. For the three months ended March 31, 2021, 59% of our total revenues came from four market makers.

So 59% of Robinhood's revenue comes from selling PFOF to market makers. I promise you that there isn't some magic altruism on the part of market makers buying the PFOF and then routing 40-60% of trades off-exchange. If it was simple matter of profiting off bid-ask spread: Force those orders through the exchanges instead of through dark pools.

This is precisely why there's an entire section dedicated to PFOF regulatory risk in their S-1. It's increasingly a rigged game and rightfully deserves deep Congressional intervention.

Did i claim that robinhood is a market maker and/or participates in market making? I simply explained how market makers are making money in a non-nefarious way and why they might pay robinhood for order flow.

> I promise you that there isn't some magic altruism on the part of market makers

As explained in my prior comment there's no altruism involved. Retail orders are valuable because they're uninformed/non-toxic

>and then routing 40-60% of trades off-exchange. If it was simple matter of profiting off bid-ask spread: Force those orders through the exchanges instead of through dark pools.

Why bring in dark pools and "off-exchange"? The whole point of buying orderflow is to execute it yourself rather than letting anyone execute them.

When the broker gives the order to a market maker directly, they can't offer a worse price than the exchanges (national best bid offer). Typically, they offer a better price (=price improvement, a "discount").

Robinhood takes a cut of that discount (and a larger cut than other brokers).

The other poster explained why the market maker gives a discount on "uninformed" retail flow compared to the NBBO.

I agree that HFT is just a silly game of being faster, and is largely rent seeking and even destroying value. But market making per se is valuable, and pretty competitive, and the spread constitutes the necessary and benign payment for that service.

Here's a suggestion:

1. Restrict trading to, say, 4 hours a day, 2 in the morning, 2 in the evening. You could maybe make it such that time zones have partial overlap.

2. During these hours, have an auction every minute, instead of continuous trading. Maybe with stochastic end time (to negate HFT techniques/sniping).

3. Impose a Tobin tax of, dunno, 1 basis point on every trade.

Measures such as those might limit the opportunity for profit from silly HFT (like replacing the cable from Chicago to NY by a slightly straighter cable to shave off a few milliseconds).

The fact is that this "spread" you speak of is a much more theoretical concept than Matt Levine understands. There is ample liquidity between the bid-ask in 99.9% of markets, and by selling order flow to someone who will internalize it at the worst legal price possible, they are intentionally failing to fill an order at the best possible price.

RobinHood also features various dark patterns that are designed to remove money from the pockets of their users and put it into their own pockets. Off the top of my head, I can list the following:

(a) Very difficult access to bis-ask spread information across multiple options. This keeps users ignorant of the fact that some options may be better priced than others, and gives market makers more opportunity to make more than a fair market spread on the transaction.

(b) Forced close-outs for reasons that no other legitimate brokerages use. Even worse than being ill-infomed about what to trade is to have all of your agency removed. It's situations like these where the gap between a fair market edge and the edge that market makers take becomes offensive.

(c) Disallowing option exercise before expiration. There are many situations where an option owner should exercise his option prior to expiry. Not only does RobinHood keep its users ignorant of this fact, they actually don't even allow their users to do it. In some circumstances, this can give market makers a massive arbitrage opportunity.

While you are right that one thing that makes RH flow more valuable is the smaller average account money size, this is actually far less of an issue than just the average account financial IQ size. Citadel loves trading with pensions just as much as RH users (i.e. similar financial IQ, but far different sizes). It's just that the type of trading that happens with each is a little different.

Add in the aforementioned reasons for keeping them not only ignorant, but handcuffed, then the more market makers will pay RH for access.

AFAIK they have duty of best execution, so they're supposed get the best price irrespective of PFOF. Obviously this conflicts with their own incentives, but that's what the laws are for.

>RobinHood also features various dark patterns that are designed to remove money from the pockets of their users and put it into their own pockets. Off the top of my head, I can list the following:

I'm not a user so I didn't know any of these. Thanks for bringing these up. Informed complaints like these are far better than the "they're front running you!" complaints that people seem to repeat endlessly.

There is a duty of best execution. I honestly don't even know if its a crime or a licensing requirement or what. Reg NMS seemed to have obviated it, and judging by the failures to execute properly on the parts of major banks (e.g. my family had a major bank execute a bond trade for them that another bond trader friend of mine said was 10% below a competitive market price. That is, they paid 90, when you could have paid 100 in the competitive market), my impression is this law is totally unenforced.

Also, it looks like no one will be able to see my criticisms because YC wants to protect their investment going into the IPO by crushing this comment thread

I remember reading about this (can't find the original source) and I thought there was a subtle distinction here, where the regulation only requires you to fill at a price at or better than the best quoted price, which isn't the same as the best possible price. Which does allow a broker to make their money (directly or indirectly) from the difference.

I think Wealthfront or the few other similar companies actually democratized investing.

Meanwhile wealthfront is marking up investment opportunities that are widely available in funds or etfs for much cheaper.

I think wealthfront is much more predatory than Robinhood if judged on the basis of services rendered to informed actors.

I don’t think trading more stocks and trading them more frequently is a “better” or even “democratized” outcome. For the vast majority of people trading more shares more often is an objectively terrible investment strategy.

In terms of economic efficiency, if that's what we mean, I would guess not: It causes the misallocation of capital to worse investments. Was the Gamestop market economically efficient?

No by efficiency I mean the spread and incorporation of more information relating to the underlying asset, making it more closely match their fair value, and the resulting tightening of the spread and reduced volatility overall. See Efficient Market Hypothesis.

It is also worth noting that it is this same hypothesis that backs the "index funds are better than stock picking" argument.

The addition of new participants helps spread, judge and value the information, more than fewer participants, which allows the information to be better incorporated into the price, resulting in a more efficient (fair value) market. As a result, the asset becomes more liquid and "fairly priced".

There is no "real price" for assets that are market valued, only whatever the market will bare. Market efficiency is about more and more participants agreeing on the going price for an asset. While this overall global disagreement on price can never be captured completely, its state is reflected by the going price and the amount of spread (difference between ask and bid price).

A big part of efficiency is being able to ask yourself how much return can you expect if you were to sell the asset right after you bought it. High efficiency, and you can expect to be able to get your money back with high certainty. Let's use an AAPL stock as an example. If I bought on today at it's low, it would have cost me $135.76. If I wanted to sell it, its be super easy. The closing spread was ask 136.96 bid 136.60, or .36/136.60 = ~0.26%, so if I bought and sold into that market as fast as they could, that is around how much I could reasonably expect to lose. The high liquidity and small spread makes that asset easy to move at low overhead cost, hence more efficient.

Compare that to wanting to buy an asset in a much less efficient market, for example real estate. Buying is not an efficient process. Not only does it take time to close, but there are overheads in both time and money that helps slow everything down and increase costs. There are much fewer participants. Not every house is the same, but also not every house is for sale. If you buy a house, you have very low certainty that you can easily sell that house right away and get your money back completely, at least least not without some other factors (time, money) put in.

If you don't like real estate as an example, consider private equity, where one is subjected in 5, 10, 20+ year lock ins of large sums of money, to buy into slices of partnerships or joint venture funds, where really one has no idea how much their investments are valued until many years later because there is no market for what they bought until everyone gets to cash out in the future. Never mind the equity fund capital calls which make you question whether your investments have indeed gone past zero and are now negative.

Low efficiency doesn't translate into loses though, just like high efficiency doesn't translate into gains. The two are independent. Low efficiency however is rife with opportunity. There is very little chance one can sell $AAPL stock at much above the going fair market value on the exchange. The same can't be said for low efficiency real estate, where it's easier to make a living off the inefficiencies in the market e.g. flipping property to the less educated new participants in that market.

Market efficiency can contribute to economic efficiency. I've long been aware of theories that markets are inherently perfect and accurate, but I believe economists abandoned those ideas many years ago. Efficiency depends on the spread of information; if a large part of the market lacks accurate information or has false information, efficiency is reduced.

> The addition of new participants helps spread, judge and value the information, more than fewer participants

Imagine a market for rockets, and the market participants are the heads of Boeing, Blue Origin, SpaceX, NASA, ESA. Now imagine that we added 1,000 random people to that market; would the information be better? Would the rockets be priced better? Probably not. The market would be flooded with bad information.

If 1000 new participants wanted to buy and sell rockets, yet, the price would become more "efficient". There would be more sellers and buyers, and more room to negotiate and trade. Your example is a stupid one.

It's disappointing to see that happen.

The only way your argument works is if we assume every new market participant is completely ignorant and completely susceptible to bad information. Like participants entering the market are doing so in bad faith and completely clueless, and like bad information didn't exist before participants entered. It's a really stupid argument to make.

So ya, it is disappointing to see happen.

The Internet isn't so great at spreading information; it is incredible at disinformation and misinformation.

Also, from their recent "Systemic Supervisory Failures" [0]:

> Between 2018 and late 2020, Robinhood experienced a series of outages and critical systems failures. The most serious outage occurred on March 2 and 3, 2020, when Robinhood’s website and mobile applications shut down, preventing Robinhood’s customers from accessing their accounts during a time of historic market volatility.

In the event of a large market downturn could you actually transfer that 60k elsewhere or for that matter, even access the platform to exit positions?

Payment for order flow means you are likely in line behind which ever Wall St firm is paying for that order flow. Yes that is illegal for them to do (called front running I believe) but the fines they pay are usually tiny compared to the revenue.

[0] https://www.finra.org/media-center/newsreleases/2021/finra-o...

This latest fine isn’t there first fine. I wouldn’t trust them with a penny. There is too much shady stuff coming to light with RH.

This reminds me of the lamentations I sometimes hear about the "unbanked" or the "underbanked".

I always think: "lucky them ..."

I don't recall ever seeing anyone criticise RH for this. It's RH's entire model to be unsophisticated and "democratise" trading.

> because of the Gamestop fiasco

Anyone who doesn't criticise RH for this has rocks in their heads. Anyone who believes RH's official explanation lacks basic critical thinking skills.