Economics Thread
- Thread starter sturg33
- Start date
nsacpi
Expects Yuge Games
Robinhood, the online trading app heralded by some as a democratizing force to empower small investors, has spent the past few years nurturing a close relationship with one of Wall Street’s biggest players and building ties with some of the most powerful institutions in Washington.
The Silicon Valley-based trading platform makes a large amount of revenue from Citadel Securities, a Chicago-based financial-services giant. Robinhood’s regulatory filings show the company charges large investment firms called “market makers” fees to access real-time information about which stocks its users are buying and selling, a practice some regulators and industry watchers have seen as a potential conflict of interest.
Robinhood routes more than half of its customer orders to Citadel, by far its largest market-making partner by volume, Robinhood disclosures show. The app also works with Virtu, G1 Execution Services, Wolverine and Two Sigma.
Robinhood’s relationships with these investment firms is likely to face new scrutiny after the online broker took the extraordinary step Thursday of limiting trading of certain stocks that were propelled to meteoric heights by conversations on Reddit message boards. After the trading halt, Reddit users accused Citadel and its billionaire founder, Ken Griffin, of pressuring Robinhood to limit trading of certain stocks, a move that may have prevented further losses for the short-sellers that lost billions betting against GameStop.
On Twitter and the Reddit forum Wallstreetbets, retail investors speculated that Robinhood had caved to pressure from its powerful business partner. Because the company does not charge its users any fees, a key part of Robinhood’s business model relies on Citadel and similar companies.
In a blog post Thursday afternoon, Robinhood strongly denied its move was influenced by the large investment firms it works with to execute trades. “This was a risk-management decision, and was not made on the direction of the market makers we route to,” the company wrote. A spokeswoman for Robinhood declined to comment on the company’s relationships with market makers.
Josh Zeitz, a spokesman for Citadel Securities, said in a statement that the company “has not instructed or otherwise caused any brokerage firm to stop, suspend, or limit trading or otherwise refuse to do business.”
Rep. Maxine Waters (D-Calif.) announced that the House Financial Services Committee would hold a hearing to examine how the market “has been manipulated by hedge funds and their financial partners to benefit themselves while others pay the price.”
Congress plans to examine Citadel’s agreement to obtain trading data from Robinhood in exchange for millions of dollars. These types of arrangements, called payments for “order flows,” have become more common in recent years and more lucrative during the pandemic trading boom of the past year. They have also drawn growing scrutiny from federal regulators who have raised concerns that they can hurt average investors.
https://www.washingtonpost.com/business/2021/01/29/robinhood-citadel-gamestop-reddit/
The Silicon Valley-based trading platform makes a large amount of revenue from Citadel Securities, a Chicago-based financial-services giant. Robinhood’s regulatory filings show the company charges large investment firms called “market makers” fees to access real-time information about which stocks its users are buying and selling, a practice some regulators and industry watchers have seen as a potential conflict of interest.
Robinhood routes more than half of its customer orders to Citadel, by far its largest market-making partner by volume, Robinhood disclosures show. The app also works with Virtu, G1 Execution Services, Wolverine and Two Sigma.
Robinhood’s relationships with these investment firms is likely to face new scrutiny after the online broker took the extraordinary step Thursday of limiting trading of certain stocks that were propelled to meteoric heights by conversations on Reddit message boards. After the trading halt, Reddit users accused Citadel and its billionaire founder, Ken Griffin, of pressuring Robinhood to limit trading of certain stocks, a move that may have prevented further losses for the short-sellers that lost billions betting against GameStop.
On Twitter and the Reddit forum Wallstreetbets, retail investors speculated that Robinhood had caved to pressure from its powerful business partner. Because the company does not charge its users any fees, a key part of Robinhood’s business model relies on Citadel and similar companies.
In a blog post Thursday afternoon, Robinhood strongly denied its move was influenced by the large investment firms it works with to execute trades. “This was a risk-management decision, and was not made on the direction of the market makers we route to,” the company wrote. A spokeswoman for Robinhood declined to comment on the company’s relationships with market makers.
Josh Zeitz, a spokesman for Citadel Securities, said in a statement that the company “has not instructed or otherwise caused any brokerage firm to stop, suspend, or limit trading or otherwise refuse to do business.”
Rep. Maxine Waters (D-Calif.) announced that the House Financial Services Committee would hold a hearing to examine how the market “has been manipulated by hedge funds and their financial partners to benefit themselves while others pay the price.”
Congress plans to examine Citadel’s agreement to obtain trading data from Robinhood in exchange for millions of dollars. These types of arrangements, called payments for “order flows,” have become more common in recent years and more lucrative during the pandemic trading boom of the past year. They have also drawn growing scrutiny from federal regulators who have raised concerns that they can hurt average investors.
https://www.washingtonpost.com/business/2021/01/29/robinhood-citadel-gamestop-reddit/
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Jaw
It's OVER 5,000!
Yep. There's money to be made in every bubble, but commoners don't get bailed out when the bubbles pop.
striker42
Well-known member
When the apps started restricting trading it was the death of the attempt. That's why if it comes out that the hedge funds had anything to do with it, people will be going to prison. Things just fell awfully conveniently for hedge funds that absolutely had the power to make this happen.
Did all the companies restrict trading of those couple of companies or just a few?
Tapate50
Well-known member
Just a few. But it was the ones that the movement used, mainly Robinhood.
Jaw
It's OVER 5,000!
Yeah this should be pretty clear to everyone by now. It works to stimulate growth and it did that for Reagan, but tax rates need to be gradually realigned once that's done. Our political system handcuffs that type of realignment, and a majority of both parties being owned by the wealthy makes it even more unlikely.
striker42
Well-known member
storming the Bastille is fun while it lasts
Some end up kings, some end up at the guillotine.
storming the Bastille is fun while it lasts
Ben Shapiro (and surely many others who aren’t the worst) was very sadly correct that it’s both good that hedge funds were being squeezed and bad that some idiots that weren’t the hedge funds would end up losing in the end.
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