Buying and selling platform Robinhood may lose a big income supply ought to the USA Securities and Alternate Fee transfer to ban the controversial cost for order flows (PFOF) — routing retail buying and selling orders to market makers.
Brokers like Robinhood typically use the observe to offset buying and selling charges, thus offering zero fee buying and selling to its retail buyer base.
Based on the Wall Road Journal on Wednesday, Robinhood’s preliminary public providing submitting revealed that the dealer earned 81% of its Q1 income from cost for order flows overlaying inventory, choices and crypto. As beforehand reported by Cointelegraph, Robinhood filed for its IPO on Thursday.
SEC Commissioner Gary Gensler has beforehand criticized the observe, and the GameStop saga from earlier within the 12 months has additionally put the matter within the highlight. Certainly, the corporate paid a $65million wonderful imposed by the SEC again in December amid allegations that Robinhood misled retail prospects about the usage of PFOF.
In the meantime, Robinhood has acknowledged that any SEC motion towards PFOF, together with stringent rules or an outright ban, may negatively affect its enterprise. Cost for order circulate is a banned observe in jurisdictions corresponding to Canada and the UK.
The uncertainty over the SEC’s stance on PFOF beneath Gensler is the most recent hurdle for Robinhood in its IPO journey. Again in June, the SEC’s inquiry into the company’s crypto trading business reportedly delayed its IPO submitting.
Certainly, Robinhood’s crypto division has skilled vital development in 2021 with its Q1 efficiency constituting a sixfold increase over the earlier quarter. Again in April, the corporate announced a new chief operating officer to supervise its increasing cryptocurrency buying and selling operations.
As beforehand reported by Cointelegraph, the U.S. Monetary Trade Regulatory Authority fined Robinhood $70 million again in June. The FINRA wonderful was reportedly on account of “widespread and vital hurt” attributed to the corporate towards hundreds of its customers.