“Robinhood Stock Drops After SEC Chairman Warns on Payment for Order Flow”
August 31, 2021
“…Robinhood shares closed 6.9% lower after Barron’s published an interview with SEC Chairman Gary Gensler in which he said a full prohibition of payment for order flow was “on the table” as part of a broader agency review.
Robinhood’s stock was briefly down more than 9% on Monday afternoon before recouping some of its losses. Shares of Virtu Financial Inc., an electronic trading firm that handles orders from retail brokerages such as Robinhood and TD Ameritrade, also fell on the remarks. Virtu stock declined 3.8% for the day…”
For those who don’t know what payment of order flow is it’s this:
“…KEY TAKEAWAYS
- Payment for order flow (PFOF) is the compensation a broker receives for routing trades for trade execution.
- “Payment for order flow is a method of transferring some of the trading profits from market making to the brokers that route customer orders to specialists for execution,” said the SEC in a study.
- PFOF has been criticized by some as creating unfair or opportunistic conditions at the expense of retail traders and investors…”