So you would rather pay a commission fee AND have order-flow sold as opposed to no fee and just sold order-flow? No matter where you trade right now, all the brokerages are practicing this.
The implication is their making up the difference in other ways. As such the example linked is a source of profit to make up for the missing 9.99$, not a customer service issue.
So, sure the article is talking about one specific means their using, but that’s hardly the only option they have. Remember the best conmen run multi layered con’s, as people finding the first layer and trying to profit from it are the easiest marks.
Can you explain how you think closing options positions a few minutes early can magically generate profit for Robinhood?
The OP complained that with the benefit of hindsight the options went up in value after being sold, but given that all retail traders are degenerate gamblers with zero actual alpha there was a 50/50 chance the options could have gone in the entirely opposite direction, and selling them early could just as easily have saved the commenter thousands of dollars.
It’s the same game as a bank which reorders transactions after the fact to maximize overdraft fees. Rather than a small profit on 100% of transactions they make significant profit on some low percentage of transactions. Making 10k on 1 in 1,000 transactions = making 10$ on every transaction.
If closing early generates more profit then they don’t win or lose, just executing the trade at close for the customer.
However, if waiting generates more profit then they can always say they executed early while waiting and then pocket the difference.
They could even even pick a mid point at time X, then compare some random time period before and after the transaction looking for a hypothetical less profitable execution time.
> However, if waiting generates more profit then they can always say they executed early while waiting and then pocket the difference.
Do you have an explanation that doesn't involve making up wild, evidence-free conspiracy theories? I can claim that Robinhood secretly makes most of their revenue from selling their users to human traffickers if I want, but that's not an actual reasonable criticism of their business model.
I just provided evidence both in the linked example and the stated policy of “anywhere from 60-90 minutes before close”. Sure, it’s not beyond a reasonable doubt, but the given example is both plausible and there is at least some evidence in favor of the practice.
Anyway, the existence or not of this policy is kind of secondary to the idea that indirect profit can be more expensive to the users. Clearly they need to be generating some revenue, and if you don’t know where it is that’s often a very bad deal. 401k hidden fees for example can sometimes exceed the tax savings.
For example: if you want to buy X for $100, but it's available for $98, then the traditional broker will buy it for $98. Robinhood, instead, will go with the $99.99 offer if that seller offers them more money.
You were willing to pay $100, so from your point of view you weren't "harmed" either way, but with the traditional broker you saved $2/share, and with Robinhood all the savings went to them.
Generally, brokers are either required to go with the best offer, or, if they don't, explain to customers that they don't and why. Robinhood violated that rule by marketing themselves and going with the best offers (but actually did the opposite) and that's what the SEC is fining them for.
I don't know if there's been a study, but that's the substance of the SEC charges that the source article is describing. (It's not clear to me if the full details of the SEC's calculation are private or I just don't know how to find them.)
The linked article contradicts this point. On balance today Robinhood is not more expensive. The parent's point about the slippery slope still stands of course.
