Robinhood, TD Ameritrade marketed to average people, told them that they had “tools” to make them better investors, research, etc. They told their prospective customers how smart those customers were, and they could compete with the big boys using charts and market information. They told the mice they could compete with the elephants.
First of all, they got a ton of marketing info about them. Banking info, financial info, demographic and other personal info. By looking at their trades, they could determine their consumer and risk preference. They could sell this info to others, or use it themselves to market additional products to these customers. They could figure out just who was vulnerable to get-rich-quick stock schemes, or sleezy stock sellers could use this info to peddle pump and dump penny stocks.
Secondly, they generated billions of shares of trades that got put thought the HFT “partners” for a kickback. The customer pays more for the stock than he should.
Finally, a lot of these casual traders turn into double or nothing if they make money. Leave it on the table and roll again. Double or nothing is a suckers’ game, sooner or later you end up with nothing. They thought these people were sheep to be sheared. When the sheep got smart, they shut them down.
No.
Are they on the hook for $300 Game Stop shares?
Only if shares are bought on margin. Or if customers lose money and sue for being allowed to buy unsuitable investments.
By looking at their trades, they could determine their consumer and risk preference.
Really?