Funny that you are being played most, when you think you are in control.
Put another way, Robinhood’s actual customers are confident that they are able to extract in excess of $109 in value each year they purchase the flow of orders from a given Robinhood user. From where and/or from whom do you suppose this money is being extracted?
It's essentially a "first dibs" approach to fulfilling a transaction. By law it's required to fill at the best price available, so there's no difference in price, and it may even fill quicker if it's in between the bid/asks because of the reason explained above.
Adverse selection is scary and knowing your counterparty is worth a lot. This is not as sinister as you're making it out to be.
How do we reconcile this with the narrative that they’re the good guys delivering wealth generation through investing to the masses?
My only point is that the narrative of Robinhood is completely backwards. Far from the “stealing from the rich to give to the poor” backstory from which the name comes from, all they’ve done is encourage hordes of unsuspecting sheep to venture deep into the wolves’ den.
PFOF may not be evil, but Robinhood certainly is. The fact that their customers’ orders are of such high value makes it abundantly clear who the moneyed players think losers at the table are. Anyone paying attention understands that Robinhood’s product is a continuous flow of suckers to their paying customers. Trading on Robinhood is an implicit bet with apparently quite poor odds that you’re not one of those suckers.
That doesn’t mean you’re better off trading on some other platform. It means they're goading you into playing the wrong game in which entities with billions at stake are so convinced you will lose they’re happy to pay for the privilege of sitting down at the table with you. The real lesson is that you should be playing a different game than the one Robinhood is promoting.
My guess is from other funds that aren't privy to what horse the lemmings are betting on today and riding that wave.
I think the order flow model is better for most retail traders. Obviously, if you're buying $20k in stock at a time, paying the fees will be better, but that's not your average Robinhood user.
(Of course, that gets rid of the "market segmentation" signals, so it'd probably make life a little better for institutions and make life a little worse for individuals, on net. No doubt smart people could disagree about how much of each effect there would be.)
Exactly, retail investors should basically be happy with PFOF.