Great catch, missed that during the article skim.
Doesn't this also enable front-running? Regardless, this is useful info for HFT funds, right?
Doesn't this also enable front-running? Regardless, this is useful info for HFT funds, right?
> Robinhood also earns money from rebates its gets for directing its order flow to broker dealers, though Bhatt insists “We do not sell data to anyone. We have never sold data to anyone. We just do not do that.” There have been misconceptions that Robinhood sells high-frequency traders its data to help them trade against the startup’s customers. But Bhatt says “The rules around this stuff as so tight. We’re not a social media company. If we even step slightly out of line with anything we all go to jail.”
Basically all they're claiming is that they're following the rules - i.e. if the rules allow selling "data" (or something that we won't call "data" but "order flow" or something) to HTFs or banks' dark pools, they're not saying they don't do it!
So they're selling some data (as opposed to running directly on an exchange, without any intermediaries). Or maybe not "selling" in the strict sense (I give you data, you give me money), but in an indirect way (I give you data, and you give me discount on your other services).
That's not what rebate means in this context. It is, in fact, actual money.
Robinhood also isn't just giving someone data. They're sending order flow to various market makers. Not data about the orders but the actual flow in need of execution.
This flow is a source of customers for market makers. Those customers get charged a fee. A % of that fee is rebated back to Robin Hood (or other retail brokers) for being originators of the customers.