“””Robinhood takes a user’s stock order and sells it to a larger trading firm that executes the trade, a process known as “payment for order flow,” the SEC order states.
Robinhood made no mention of payment for order flow rates, federal regulators said, at a time when the company was rapidly growing. While Robinhood markets its services as “commission free,” the SEC claims that customers in reality received inferior trade prices”””
OK SEC, if you are going to fine Robenhood $65 million for this practice, then you also better start fining the many other brokerage firms who have ZERO commission fees.
“”” process known as “payment for order flow,””””
Also, the way to avoid being scammed by the above process by the brokerage firms is to place ‘limit’ orders when you buy or sell.
When a person places a ‘market’ order to buy or sell, they are subject to the brokerage firm buying at the highest price offered or selling at the lowest price offered.
I never used a $0 commission brokerage. I paid plenty of fees...in and out. Payment for order flow will almost always screw the little guy because of time. When I was trading I always worked with a direct brokerage where I could actually see the order flow, numbers of buys and sells lining up. All I had to do was click on the current offer/sell and bam my trade was done. I bounced around for a few years with brokerages but finally settled on Tradestation because I loved their charts. I learned how to code my own programs for them.
And why is that? Most firms have several pages of disclosures on those fees. They are not misleading anyone. But you do have to actually have to read the fine print.
“Robinhood provided misleading information to customers about the true costs of choosing to trade with the firm,” SEC Enforcement Division director Stephanie Avakian said in a statement.
And how is free trading different from the ‘free’ communications on facebook?
Android the ‘free’ OS?
Free search engines?
Free maps...
I know that Google sells phones and they make a huge amount of money, but I have never purchased anything from them?
And I’ve never seen an advert for anything sold by Google?
What is the ‘true’ costs for the Google phones?
And often when using Google ‘free’ products I notice the smell of burning sulfur?
At first, I thought it was the power supply on the desktop?
Now certain the PS is OK?