[SEJeff]

> It puzzles me how people still think Robinhood can remain competitive knowing they sell user's order flow to hedge funds

Many brokers do this. They get better execution services from hedge funds / electronic traders than they could possibly build themselves. Given rules like NBBO for equities, this can really matter. It saves them money in engineering a hard problem AND makes them money from the other side.

[jessaustin]

You cut off the end of the proposition: "...and restricted free market movement of capital in the markets."

It is relatively common for brokers to sell order flow. It is not unheard of for brokers to stop trading in a security for limited periods. It is very strange for brokers to enforce one-way trading in a security as Robbinhood did, and highly suspicious on top of that when the resulting asymmetric trading regime is of enormous commercial benefit to the biggest purchaser of their order flow.

[swampthing]

That is the narrative that the mob would like you to believe, but it's actually not true. Here are some examples of that happening in the past:

* https://mobile.reuters.com/article/amp/idUKKCN2253T2 * https://mobile.reuters.com/article/amp/idUSKBN1FT2S4

Robinhood was in a no-win situation. You can read about why they were forced to restrict buying here: https://www.cnbc.com/2021/02/01/elon-musk-on-clubhouse-robin...

If they restricted sells too, they would have been lambasted, likely even more than they currently are, by people trying to get out of their positions either to capture gains or avoid loss.

Robinhood's only move was to mitigate the fall-out with customers through messaging, which they failed miserably at. It's unclear to me whether this failure was due to incompetence or because they were (or thought they were) restricted from providing certain information by law or contract.

[jessaustin]

Those other cases seem fairly obscure, prevented people from buying plummeting assets, and might not have been so defensible themselves. The reason cited was to protect foolish small investors. This is fundamentally a different thing than intentionally damping the rise of a security that has been up over 100% for nearly a week. That didn't protect any small investors. Whom did it protect?

Somehow I doubt perjury attaches to an untranscripted chat on a celebrity-only private audio app. Everything at that third link seems highly lawyered: "From our perspective", "I wouldn’t impute", passive voice, etc. From a guy named "Vlad" who looks like Dracula. I guess it was just prejudice that caused me to expect someone from Sherwood...

[swampthing]

> That didn't protect any small investors. Whom did it protect?

This question is irrelevant in the case of Robinhood, because they had no choice. It seems like that is also fundamentally why they didn't restrict selling — because they wren't required to, whereas they were required to restrict buying. I.e. they imposed the minimum necessary restrictions. This is exactly what you would want from someone in Robinhood's position. You don't want them making their own decisions about who can buy or sell.

> Somehow I doubt perjury attaches to an untranscripted chat on a celebrity-only private audio app. Everything at that third link seems highly lawyered: "From our perspective", "I wouldn’t impute", passive voice, etc.

If something was highly lawyered, do you really think they would go with a lie that would be this easy to disprove? I.e. a lie that relies on people with no interest in Robinhood to uphold it?

> From a guy named "Vlad" who looks like Dracula. I guess it was just prejudice that caused me to expect someone from Sherwood...

I don't know that it makes sense to base whether or not you believe him on things he has no control over.

[SEJeff]

That part I entirely agree with you on. I just wanted to point out that the practice of selling flow to companies who do really good execution is commonplace and sort of expected. I’d bet 10,000 robinhood could never build trade execution as good as citadel or any number of electronic trading firms.

But to your latter point, it seems almost criminal. At the least, I hope the class action against robinhood is won by the clients.

[ac29]

> It is very strange for brokers to enforce one-way trading in a security as Robbinhood did, and highly suspicious on top of that

My understanding is that brokers must execute their customers trades if possible. The collateral requirement they ran into only affected purchases, hence why buys were restricted but sells were not.