Yeah, just to expand on this a bit, here’s a quote from a 2018 WSJ story:
Such firms make money by “market-making,” or buying and selling shares all day and collecting the difference between the buy and sell price. That’s risky to do on exchanges, where banks or hedge funds can suddenly snap up or dump many shares, moving their price and hitting market makers with losses. That risk leads market makers to be cautious and quote wider spreads. For instance, they might offer to buy Apple Inc. at $200.00 and sell Apple at $200.05, a five-cent spread.
But when market makers trade with individual investors, whose orders tend to be small, they can tighten those spreads. For instance, they might offer to buy Apple for $200.02 and sell it for $200.03, a one-cent spread.
That benefits small investors, who save two cents on each share—buying at $200.03 instead of $200.05, for instance. The market maker still makes a small profit from the one-cent spread.
What if the broker demands a big payment from the market maker? That reduces the market maker’s profit, forcing it to quote a wider spread. And the customer gets less price improvement.
And Robinhood appears to be taking more cash for orders than rivals, regulatory filings show.
If a customer buys 100 shares of Apple for $200 each—a $20,000 purchase— Robinhood could get up to $5.20 for routing that order to electronic-trading giant Citadel Securities LLC, according to calculations based on a recent Securities and Exchange Commission filing.
Schwab would be paid around 9 cents for sending the same order to Citadel, while TD Ameritrade would get 16 cents on average, according to these companies’ SEC filings.
That’s a nearly 60-to-1 difference between what Robinhood and Schwab are paid. The gap isn’t always so wide, because of differences in the formulas used to determine the size of the payments. Still, Robinhood often makes much more for the same orders, the filings suggest.
For the majors, it happened less than a year ago:
This is financial related but a little off topic.
We are refinancing our house, and planning on rolling my wife’s student loans (~$20,000) into the new mortgage.
Are there any reasons not to do this? The student loans range from 4-7%, and the mortgage will be 2.75%. We won’t have to deal with Navient, who is a giant pita.
There’s no realistic chance of student loan forgiveness on a wide scale any time soon right?
I would probably do this, but there are a couple of points:
- I believe that if you plan on deducting mortgage interest for your taxes, you would not be able to deduct the amount of mortgage interest related to your student loans. So that’s an admistrative hassle every year.
- If your wife were to pass away, the student loans might be discharged. But if you roll them into your mortgage, you’re jointly liable.
I still have a small amount of outstanding student loans. I’m paying the minimum and waiting to see what happens. If Democrats sweep, I think some forgiveness is likely but it will probably be means tested.
Hold on to your shorts!
I’m one of those RH noobs who’s been buying since April so take my opinion with a grain of salt… but feeling like a large correction is finally imminent.
he doesn’t realize it but his limit orders are not getting executed until the stock is past the limit price, for ex RH will not execute his $75 limit buy until the price of the stock hits 74.90
the only way to avoid this is to use a real broker instead of RH.
TSLA just instantly went up 8% AH and $20,000,000,000 in market cap after announcing a stock split. If you needed any more proof that the market is currently being driven by clueless morons there you go.
His broker is IB and he pays $2.40 per futures contract. Up til now he’s been bidding at the Ask (and vice versa) and getting his orders filled within milliseconds. He has the “switch to a market order after __ seconds” mechanism active, but I don’t think it has come into play yet.
Now, in the most high-volume instruments he’ll try bidding a tick below the Ask to see if greed will pay off. He figures in the S&P there is probably a tick of fluctuation any given second and his orders should get filled often enough.
I know what you mean but laughed anyways
Well yeah, buy one today, get 4 free tomorrow.
That’s supposed to be sarcasm, but considering TSLA stock price is more anchored to whatever retail donks feel it’s worth and $420 pot jokes rather than any underlying value, it might actually be the most valid way to price this move.
Oh hey remember how we finally had a red day? Immediately gap back almost all of the sell off on nothing
We just needed a night to remember that Vlad solved the coronavirus crisis.
Rotation back into tech which is weird (or at least the NASDAQ).
Part of me wants to dump my entire portfolio and go 50/50 Apple and Tesla. I’d never do it but we can all but guarantee once they split people will be able to “afford” them now because they’re “cheap” so there will be a huge pump.
It’s really hard to pretend like the real world businesses with significant physical business operations aren’t being heavily impacted by the Coronavirus. All that money has to go somewhere if it’s rotating away from that. Tech is one of the only places you can put that kind of money.
So much of this current bubble is just the result of the huge inefficiencies inherent in giving the ownership class too big a share of the national income. They are literally generating so much cash that a real shortage of investable opportunities is causing a huge pricing bubble in the stuff they actually can justify investing in.
People like me on the bubble of the ownership class are pretty much frozen out too. I have cash, but I need that cash safe because it’s worth a lot more to me than additional cash would be. At my stage it’s a lot like playing in a tourney where survival is way more important than doubling your stack size. The transition from being an employee with a guaranteed paycheck to being a business owner is genuinely really rough cash flow wise lol.
Someone please talk me off the ledge of unloading on SPY puts.
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