[JumpCrisscross]

> Taking the opposing side of all Robinhood trades would cause a broker-dealer to lose all of their capital very quickly

Why? This is literally the definition of order flow purchasing and market making. Flow amidst spreads creates profits.

The non-cynical explanation for Robinhood’s flow being attractive is in the law of large numbers. Robinhood’s trades are tiny. That means buying their flow gives one lots of small, idiosyncratic exposures. Institutional flow, on the other hand, is lumpy, which can leave one with a few giant positions.

[totalZero]

To add to what you're saying about less chunky risk...people in the market-making industry also prefer to cross with retail customers because there is less negative selection bias. Retail customers are generally less sophisticated traders and they are less likely to trade fast alphas, insider information about pending news, etc.

That said, there's money to be made in providing liquidity on chunky trades, as long as the price is right.

[MagnumOpus]

He doesn't mean taking the opposite side and immediately offloading the risk in the market with a small bid-ask.

He means taking the opposite side as a principal - like many spread betting companies do. Which is dangerous because not all Robinhood clients are small and uninformed.

[cs702]

Also, as the OP believes, Robinhood's flow is being induced, i.e., manufactured by Silicon-Valley-style maximization of user engagement. User engagement is the raw material necessary for creating as much order flow as possible for sale to Wall Street firms. Order flow from engaged users is the product.