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by NickNaraghi 334 days ago
The main value proposition is faster settlement.

The big institutions can measure their profits in terms of settlement time, going from 2 days to 1 day (previous infrastructure upgrades) to instantaneous (this) makes them more money.
2 comments
lxgr 334 days ago
I see how it can make sense on the settlement layer, but that's of absolutely no relevance to individual investors, which is who Robinhood are targeting.

In the EU, as far as I remember most modern brokers let you buy shares with unsettled proceeds of others without restrictions; in the US, getting a margin account takes no effort at all and bypasses the freeriding rules too.

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NickNaraghi 334 days ago
Unfortunately, Robinhood makes money by selling individual investor orderbook data to the big guys so they can front-run them
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lxgr 334 days ago
Payment for order flow is not front running. The PFOF trader only gets right of first refusal on every trade; whether they take it or not, the broker is still obliged to execute the trade at NBBO or better.

It actually gets retail investors better prices than institutional or professional ones, since the counterparty can safely assume that there's "dumb money" on the other side of the trade.

That's not to say it's not controversial in some aspects, but it's not as simple a situation as you make it out to be.

Also, somewhat ironically, the front running risk on many decentralized exchanges is much higher due to MEV being a hard problem to solve trustlessly.

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chollida1 334 days ago
Can you explain how shorter settlement time is a benefit to retail clients who buy these tokenized stocks?

Or how you see big institutions making more money by reducing settlement time?

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