For the longest time possible, Robinhood has enjoyed the ride of good announcements regarding its operations. However, in the recent past, the zero-trading fee cryptocurrency platform has found itself on the receiving end for various wrong practices. Reports indicate that the company is engaging the high-frequency traders at the expense of the millennial. This includes selling of customer?s orders at a higher rate and in return making billions of money in profit.
Whether these claims are true or not, the startup has obtained a load of positive media coverage for having earned a multi-billion dollar valuation within a very short time. Nonetheless, this success has now come under scrutiny as a result of what many claim to be unfair market practices.
The skepticism surrounding high-frequency trading
Journalist Logan Kane of Seeking Alpha is the person behind the revelation of the mysterious operations Robinhood. By diving into the company?s financial report for the second quarter of 2018, Kane was able to point out how Robinhood was selling customer?s orders ten times more than they sell.
Reporting on Seeking Alpha, the financial journalist stated, ?It appears from recent SEC filings that high-frequency trading firms are paying Robinhood over 10 times as much as they pay to other discount brokerages for the same volume.?
Apparently, the customer allegedly accepts payment for order flow, a move, which Kane says it raises eyebrows on the quality of executions provided by Robinhood.
But Robinhood has denounced the report about the alleged practices
The company has since refuted the claims made by Kane. Through a statement by Jack Randall, the Head of Communications of Robinhood the company says that it is obligated to execute customer orders but through the best price. It further claims that the Federal Law guides its operations. Nonetheless, the company will not disclose how much it pays per share.
Robinhood has further explained its mandate is not only taking but also keeping the privacy of its customers intact. Thus it is not likely that it has sold their customer information to a third party. However, all said and done, it is not clear whether the relevant authorities will carry out further investigations into the matter.