Robinhood Selling Info to Trading Firms?

The infamous ZeroHedge published a tweet that seems to be legitimate, indicating that Robinhood sells information on its orders to trading firms that front run user orders. This would partially explain how a few thousand retail day traders on RH move the market -- trading firms' algos front run the trades and massively accentuate the momentum. Seems to be backed up by this info on RH's website:…

I'm sure it's legal for Robinhood to screw over their customers like this, but I'm not sure how -- it seems like whenever an order is placed, another firm will front run the customer and get them a worse fill. I don't blame the trading firms of course, it's not like the RH customers are clients of the firm. But to me, it seems like Robinhood shouldn't be allowed to do this...

Comments (15)

Tryna Trade, what's your opinion? Comment below:

Of course I've read flash boys but this isn't a dark pool at all, this is Robinhood selling trade information directly to firms before they place they order at all?

Learn More

300+ video lessons across 6 modeling courses taught by elite practitioners at the top investment banks and private equity funds -- Excel Modeling -- Financial Statement Modeling -- M&A Modeling -- LBO Modeling -- DCF and Valuation Modeling -- ALL INCLUDED + 2 Huge Bonuses.

Learn more
anon999, what's your opinion? Comment below:

Payment for order flow isn't front running although some people find it shady. Most other retail brokerages do similar things.

Most Helpful
BlinkTy, what's your opinion? Comment below:

firms do pay robinhood for this data, but it's not for front-running. in fact it's the opposite--these firms give retail investors hundreds of millions of dollars a year in price improvement relative to the best prices given to institutions because the order flow is so much less toxic.

retail investors are actually paid twice for this arrangement. first, the literal payment for order flow helps robinhood charge 0 commissions, then secondly the firms price improve and give exec prices that are better than NBBO to retail flow.

  • 4
  • Developer in HF - EquityHedge

This. People for the most part don't really understand how market makers make money.

The reason why firms like Citadel pay for order flow is the fact that it comes from retail investors who basically have no edge. Hence they can reliably make 1/2 of the spread in profit. The worst customers for market makers are sophisticated investors who have real edge.

Pescepescetarian, what's your opinion? Comment below:

Holy shit how did I miss this post.

Do you know at what granulairty they are selling this data at?

I mean are they selling data that says - "trader A made these trades at these times... " Or are they selling "these are all the orders that went through on Robinhood".

If it's the former, at least I hope they are anonymized. Even the exchanges are prohibited from using the information specific entities that made the trades to profit.

  • 1
Frieds, what's your opinion? Comment below:

This is perfectly legal. Robonhood does not have their own execution desk and routes their order flow to half a dozen broker for execution. This is perfectly normal. RH is paid for order flow. Mind you, I've openly said I have issues with RH on WSO before, but this isn't one of them. Routing Order Flow to an executing broker is how RH remains free, for the most part (I don't know how many users pay for Gold status btw).

  • 1
ironnchef, what's your opinion? Comment below:

you are all idiots...robinhood doesn't sell your information....robinhood sells your actual trade orders. This is called "payment for order flow" and all the retail brokers do this (TD Ameritrade, Charles Schwab, ETrade, etc..)

Robinhood does not execute your trades...they hand the trades over to Citadel (for a little $$)...and citadel executes your trades on behalf of Robinhood.

Citadel makes the bid/offer spread executing your order...and gives a little of that $$ to robinhood (that $$ is the robinhood profit).

franco, what's your opinion? Comment below:

Et autem corrupti earum dicta maxime alias non. Et quo inventore incidunt aspernatur architecto nulla. Et autem magnam magnam quis veniam. Quas illum beatae et esse et quo maiores. Rerum veritatis dolor iste dolores quia libero quas temporibus.

Non consequatur et sunt nihil est deleniti est. Ullam dolor animi sed maxime officia asperiores. Laboriosam animi quas rerum ipsum.

Ex laboriosam modi blanditiis eaque at. Sapiente eos fuga quia laudantium. Repellendus et rerum sed modi incidunt vero. Commodi fuga velit vero. Totam placeat doloribus fuga consequatur.

Start Discussion

Career Advancement Opportunities

January 2023 Investment Banking

  • Lazard Freres (+ +) 99.5%
  • Jefferies & Company (▽01) 99.1%
  • Lincoln International (▽01) 98.6%
  • Financial Technology Partners (▽01) 98.1%
  • William Blair (▲08) 97.7%

Overall Employee Satisfaction

January 2023 Investment Banking

  • Canaccord Genuity (▲04) 99.5%
  • William Blair (▲04) 99.0%
  • Lincoln International (▲09) 98.6%
  • Jefferies & Company (▲06) 98.1%
  • Financial Technology Partners (▲09) 97.6%

Professional Growth Opportunities

January 2023 Investment Banking

  • Lazard Freres (▲15) 99.5%
  • Financial Technology Partners (▲09) 99.1%
  • Lincoln International (= =) 98.6%
  • Jefferies & Company (▽03) 98.1%
  • William Blair (▲01) 97.7%

Total Avg Compensation

January 2023 Investment Banking

  • Director/MD (6) $592
  • Vice President (23) $401
  • Associates (134) $264
  • 3rd+ Year Analyst (9) $194
  • 2nd Year Analyst (80) $172
  • 1st Year Analyst (257) $171
  • Intern/Summer Associate (41) $167
  • Intern/Summer Analyst (185) $91