What SEC Action on Robinhood Would Mean For Citadel

Sep 8 , 2021

What SEC Action on Robinhood Would Mean For Citadel

Robinhood's largest purchaser of its orders is Chicago-based Citadel Securities, sister company of prominent hedge fund Citadel.

After US Securities and Exchange Commission Chairman Gary Gensler indicated a comprehensive prohibition on paying for order flow is “on the table,” Robinhood Markets Inc. continued to fall.

After Gensler told that paying for order flow — where brokerages direct consumer orders to trading companies and earn fees in return — has "an inherent conflict of interest," Robinhood dipped approximately 0.8 percent to $43.31 as of 10:28 a.m. in New York on Tuesday.

Gensler has previously made similar arguments about the technique, which has been scrutinized by policymakers in Washington for months as a result of the run-up of meme stocks like GameStop Corp. Even yet, any talk of an outright ban might frighten investors, in part because paying for order flow accounts for a large portion of Robinhood's income: payments for its clients' stock, options, and cryptocurrency transactions accounted for nearly 80% of the company's second-quarter revenue.

Citadel Securities, located in Chicago, is Robinhood's largest order buyer. For the trading orders on which it generates money, the sibling business of famous hedge fund Citadel relies on brokers. That sector has exploded in recent years, thanks to the advent and meteoric rise of startup brokerages like Robinhood, which don't charge customers to trade and instead make the majority of their money by charging businesses like Citadel Securities for order flow.

Eliminating such fees may jeopardize or terminate the "no-cost" brokerage model that has attracted a slew of new traders to the market, as well as lower the volumes on which Citadel and its competitors rely.

A representative for the Citadel declined to comment.

Some politicians have questioned if this encourages businesses to push consumers to participate in excessive buying and selling because brokers like Robinhood benefit from selling deals. Gensler said in a Monday interview with the online news magazine that it allows market makers to have a "first look" at transaction data, which may lead to undue advantages.

According to Gensler, countries such as the United Kingdom have already outlawed payment for order flow. Some in the financial sector have questioned whether the SEC would require further congressional power to outright prohibit the practice.

Making major changes to the system, according to Jaret Seiberg, a policy analyst at Cowen Inc., would be tough.

“Gensler has other priorities, and given the intricacy of the problem and the tangled politics that surround payment for order flow, he is unlikely to intervene directly against payment for order flow,” Seiberg wrote in a note.

What Bloomberg Intelligence Says:

“He didn't rule out outlawing PFOF, but we don't think he's very keen on doing so, preferring instead to make changes as early as 4Q. PFOF has been shown in studies to result in advantageous pricing for ordinary investors, therefore regulation to ensure effective execution is more plausible than a ban.” —Julie Chariell, BI senior industry analyst for fintech

Subscribe Our Newsletter

Which Stocks Are Corporate Insiders Buying Now?
Which Stocks Are Corporate Insiders Buying Now?

Corporate insiders are bullish on small-cap stocks and those trading for low price/earnings and price/book ratios. That bodes well for small-cap value stocks.

Stocks
Apple Missed Earnings and Revenue Forecasts. The Stock Is Declining.

Milena

Apple Missed Earnings and Revenue Forecasts. The Stock Is Declining.

Sales of the Mac, iPhone, and wearables fell far short of forecasts in the most recent quarter, creating additional concerns about consumer demand in a faltering economy.

Stocks
B2BROKER Liquidity B2BROKER Liquidity
Sponsored
Alexander

Investing Basics Quiz: How Well Do You Know Financial Markets?
It is essential to have a good understanding of the basics of investing and financial planning. Are you confident about your grasp of financial markets? Take our quiz to test your knowledge.

discover
Head and Shoulders Pattern — What is It and How to Identify It?

Constantine

Head and Shoulders Pattern: What is it, and How to Master it

Learn what head and shoulders patterns are, what types there are, and what to consider when trading with them.

Trading
Contact us bg

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiriesb2broker

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Successful!
    Thank you for your request.
    We will contact you shortly.
    Close

    Hazem

    MetaTrader vs cTrader: Which Trading Platform Shall You Choose?

    MetaTrader vs cTrader: The Full Breakdown

    Сonstantine

    Will Dogecoin Reach $1? Tokenomics and Price Analysis

    Will Dogecoin Reach 1 Dollar Analysis

    Сonstantine

    How to Get a Crypto Exchange License?

    How to Get Crypto Exchange License

    Сonstantine

    Best Crypto to Buy Now: Guide for Investors

    Best Crypto To Buy Now

    Hazem

    Grok vs ChatGPT: What’s the Best AI Assistant You Need in 2025

    Grok vs ChatGPT

    Сonstantine

    How to Choose the Right Liquidity Provider for Your Brokerage

    How to Choose the Right Liquidity Provider for Your Brokerage

    Сonstantine

    Low-Latency Trading Defined: Speed, Strategy and Technology

    Low-Latency Trading Explained

    Hazem

    How Liquidity Depth Affects Slippage in High-Volume Trading

    Liquidity depth and slippage in trading

    Hazem

    What is FIX API Liquidity Connection and How Does it Power Institutional Trading?

    FIX API in institutional trading

    Сonstantine

    OTC Trading Strategies and Technologies to Succeed in Over-the-Counter Markets

    OTC Trading Strategies

    Alexander

    What is OTC Trading? A Complete Guide for 2025

    what is OTC

    Alexander

    Synthetic Futures: A Trader’s Guide to Replicating Positions with Options

    How to Trade Synthetic Futures

    Сonstantine

    Order Book Depth: What It Is And Why It Matters?

    Order Book Depth What It is And Why It Matters

    Alexander

    Spot vs Perpetual Futures: Which Is Right for You?

    Spot vs Perpetual Futures explained

    Hazem

    5 Reasons Traders Are Switching to Perpetual Futures

    5 Reasons to Switch to Perpetual Futures

    Constantine

    Top 3 Liquidity Challenges Facing New Exchanges and How to Solve Them

    Top 3 Liquidity Challenges Facing New Exchanges Today

    Constantine

    Financial Planning in the Cryptocurrency Era — Master Crypto and Digital Asset Strategies

    Financial Planning in the Cryptocurrency Era

    Hazem

    Best Platforms to Trade Perpetual Futures in 2025

    Best platforms to trade perpetual futures in 2025

    Alex

    Top 10 Fintech Website Development Agencies for 2025

    Best Fintech Website Development Agencies for 2025

    Сonstantine

    Internal vs External Range Liquidity In ICT Trading Explained

    Internal vs External Range Liquidity In ICT Trading

    Constantine

    Portfolio Backtesting — Tools, Metrics, and Methods Explained

    Portfolio Backtesting

    Сonstantine

    ICT Trading Explained: Smart Money Concepts, Tools and Setups

    ICT Trading Explained

    Сonstantine

    CFD Trading Strategies: A Practical Guide to Risk and Execution

    CFD Trading Strategies

    Alexander

    What is a Fair Value Gap? A Guide to Trading Market Imbalances

    What is Fair Value Gap
    liquidity-provider-logo
    • News
      • Stock Market Forecast
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
      • AI
      • Technology
      • DeFi
      • NFT
    • Articles
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
      • Blockchain
      • Investing
      • NFT
      • DeFi
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
      • White Label Brokerage Platforms
      • Broker CRM Platforms
    [email protected]

    © 2024 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy
    This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.