That is an insane drop. What is going on? Are they being outcompeted or simply not making money? Is their business model (being an easy to use broker for little people) simply not good?
I started trading on RH in 2019. They make investing simple and approachable for someone who like me who knew the basics and just wanted to play around a bit with some spare cash.
But after a couple years when I want to start taking it more seriously, their platform has failed to grow and improve. In the three years I've used them, I can't think of a single new feature they added that I use. Meanwhile, there are plenty of things I'd like. For example, it's beyond ridiculous that price graphs don't have their axes labeled. When selling stock, it's always FIFO, so I can't choose which lots to sell to optimize tax liabilities.
The problem is that I have a hard time leaving because their margin rates (~3%) are so damn good compared to the major players (8% or higher).
IB has very conservative risk management wrt margin and there is no margin call. If the market moves against you, they will liquidate you rapidly. Something to keep in mind when considering your LTV. Their margin rates are good, but there’s a reason they’re good.
Good margin rates will be difficult to find in a rising interest rate environment. You can get lower rates from traditional brokers if you have a substantial net worth btw ($1MM+ AUM).
There aren’t offering anything new and even frontrun their customers. And with the GameStop fiasco, I think a lot of people realizes it was a bad business model. I don’t think they will be able to recover. It will drop even more if a recession ever hits.
They don't front-run orders. They still give best execution but they receive a small fee from market makers for sending orders their way.
If both market maker A and market maker B offer the same price but B is going to pay them slightly more than A for your order, then they can legally route your order to B.
Many brokers do this now.
Front running is different entirely. For example, if you were about to buy a load of stock, front running would be Robinhood buying in before you, waiting for your order to clear the price level, and then selling a few ticks higher.
>They don't front-run orders. They still give best execution but they receive a small fee from market makers for sending orders their way.
I really have most serious doubts about the idea that you can simultaneously get paid for order flow and deliver on your best execution obligations - the payment for order flow literally comes out of missed price improvement opportunities for the customer. FINRA seems to feel the same way and fired a warning shot over the bows last year: https://www.finra.org/rules-guidance/notices/21-23
Citadel believes that they are less likely to lose money when they fill orders from retail investors. They're just paying for access to rubes, basically a finders fee.
Went from being the golden child of /r/wallstreetbets (literally every portfolio screenshot was of robin hood) to being villainized due to suspicious circumstances regarding locking people out of trading Gamestop "for their own good." Now any screenshot of robin hood is ridiculed.
Yeah as soon as those orders weren't being filled and the ceo of robinhood was grilled by congress no one ever believed in them. On the discord there still people that use robinhood but most people use different brokers anyway like TD Ameritrade.
The entire market had a similar drop this week (especially today) and has been slow-burning for the last three months, so. Take it with a grain of salt.
