We are in favor of SEC Chair Gary Gensler’s proposal to route retail order flow to auction.
The practice of paying for order flow has thrived since the mid 2000’s led by dark pools such as those operated by Citadel. Access to customer order flow allows Citadel, Renaissance Capital and a large number of other high-frequency trading (“HFT”), firms to front-run customer orders within their own trading book. Take the example of Renaissance’s fund for internal partners which recently generated outsized returns while money it manages for outsiders underperformed HERE. Read about the SEC’s proposal HERE. Were the SEC’s proposal to pass, it would be the final nail in the coffin that is Robinhood (HOOD), given that the firm generates revenue by selling customer order flow.