Gurley explains Robinhood doesn't route orders to exchanges but sells them to six companies who are their real customers.
“They sell that order to six different companies that they work with who are really their customers.”
Gurley found a 2005 Citadel filing arguing payment for order flow should be illegal due to conflicts of interest.
“You know, it's interesting. I stumbled across a piece that Citadel had sent to the SEC in 2005, where they argued that it should be illegal because of inherent conflicts of interest.”
Gurley notes Citadel argued to the SEC in 2005 that payment for order flow should be illegal.
“I stumbled across a piece that Citadel had sent to the SEC in 2005, where they argued that it should be illegal because of inherent conflicts of interest.”
Gurley says over half of Robinhood's revenue comes from payment for order flow for options, which history shows loses money.
“Over half of the revenue that Robinhood has reported is payment for order flow for options.”
Gurley states Robinhood makes 4x more revenue per options trade than stock trade via order flow.
“they make about 4x the amount of revenue on a option trade than they do a stock trade. Why do I bring this up? Know, Deutsche Kline and options trading like they talk,”