A recent SEC filing suggests that zero-fee trading app Robinhood is making huge amount of money by selling customer data to high-frequency-trading firms. Recent developments are supplementing your the controversy around the lack of transparency in Robinhood’s feature.
After opening in 2019, Robinhood has developed to become a nearly $6 billion company by attracting investors making use of their zero-commission fee trading options. The exchange platform has grown most popular with millennials that definitely have opted make use of Robinhood as a means of going about the grain of making use of traditional financial platforms. Robinhood’s support among adolescents reached an apex this holiday season when it did start to offer zero-fee trading for top-listed cryptocurrencies.
The company states to rely on margin lending and interest accrued from customer account balances since its primary sources of revenue. However, recent data created by the US Filing is starting to reduce light about what appears to be an unethical feature driving Robinhood’s success.
The SEC filing means that Robinhood may be relying more heavily on selling user financial data compared to company need to admit. In actual fact, Robinhood appears to be selling users’ order details at a minimum of 10 times final results other brokerage firms typically charge. While selling user results are in itself a questionable practice, now there is growing concern that Robinhood will not be fully disclosing the type and scope of the customer data operations.
What’s additionally concerning is the fact Robinhood has during the past been connected to several other companies that have come under investigation or maybe in some cases been fined with the SEC for illegal trading. While it began with 2019, hedge fund firm Two Sigma Investments, a Robinhood-partnered company, was subpoenaed through SEC regarding market research program designed garner specifics of companies’ stock analysts. Then in January of 2019, Citadel Securities LLC, certainly one of Robinhood’s clients, was fined $22 million by the SEC for misleading clients about pricing trades. Finally, in October of 2019, Robinhood client Wolverine Securities was fined $1 million by SEC for insider trading.