Robinhood Made Nearly $700 Million Selling User Data To Hedge Funds...

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Citizen X

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Dec 2, 2019
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Well, it turns out that Robinhood was a Trojan Horse. Instead of working for its retail citizen users, it was instead merely a platform that Hedge Funds. The platform mined the trading data of users to understand their behavior and who knows what else. This would allow them to know exactly what citizens were doing and make even more money robbing those users on Wall Street. And, the second that retail traders realized and financially articulated their power on the relatively new platform, they were ruined by the platform itself.

This occurred when Robinhood (and other platforms) illegitimately stopped trading of GameStop Shares and others that the Reddit group WallStreetBets were buying en masse.


“One reason why allegations against Robinhood have persisted may have to do with the company’s controversial revenue model, which has led to a surge in earnings over the last two years, according to CNBC.

Robinhood has long branded itself as an accessible platform that provides free financial services for its users. Its mission statement includes a pledge to “democratize finance for all.” But the company makes money by selling its order flow — information about user transactions — to third party clients who actually enact trades with access to user data.”

Order flow has accounted for the vast majority of Robinhood’s quarterly earnings. The company earned roughly $675 million in revenue from payments for order flow, according to quarterly revenue data compiled by The Box.
Trades may be commission free for Robinhood users but they are actually sold to “market makers” that often used their position as the middle man to generate profit, according to the Financial Times. Most of these “market makers” are hedge funds or other institutional investors that financially benefit from more trade and market volatility.
Robinhood was fined $65 million by the Securities and Exchange Commission (SEC) in December for “misleading statements and omissions” regarding its payment for order flow process. The SEC concluded that Robinhood “deprived” users of $34.1 million after providing their order flow to clients that prioritized higher revenue over providing the best price for customers.
Robinhood’s largest clients for order flow are all hedge funds and other institutional investors according to an SEC filing from 2020. More than half of the company’s market orders were purchased by Citadel Securities — an affiliate of the hedge fund Citadel LLC.”


As the old adage goes, if you are not being charged for the product, you are the product:


 

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