Robinhood engaged HFT firms to increase order flow

2 min read

Robinhood order flow income rose thanks to HFT firms
It looks still strange to engage HFT firms in order to increase order flow income. The skepticism is great. Also the criticism.

But the facts are that Robinhood’s order flow income rose 227% in 2018, thanks to HFT firms.

And this is a standard offer among Wall Street brokers such as E*Trade or TD Ameritrade.

What Robinhood did?

It engaged HFT firms to increase order flow.

Payment for order flow is still unknown and strange to the majority.

And somehow they read that kind of market presence as the immoral.

Traders Paradise wrote about HFT firms and strategies already.

But, let’s see what Robinhood did.

The popular millennial stock-trading app earned $69 million in order routing income in 2018. According to a survey from Alphacution Research, it three times more than the company made in 2017.

Payment for order flow is a standard offer among Wall Street brokers.

When employs HFT firm, the company is expecting more flow through its platform and it has it.

Robinhood app is very popular among the millennials.

The millennials like high-tech. And they will adopt any new product or gadget that can help them and make easier to buy anything.

When we all adopted the internet, didn’t we have the same idea on our minds? To make communication easier, to provide ourselves better access to everything.

Traders-Paradise - AI-Driven Trading Insights

So, where the problem is now?

High-frequency trading is called ”dark-pool” because of the absence of regulation.

Traditional traders are opponents. They say that these millisecond trades are against Wall Street and everything that is present on the markets for decades.

Actually, it is not.

High-frequency trading is based on traditional trading strategies. The main difference is the time of performance. The journey from the moment when trader see the opportunity and the moment the trader place the order is shorter. HFT algos will need millisecond while the traditional way would require much more.

Yes, it is still unknown for the majority of how this HFTs work.

Honestly, most of us will never reveal how the dishwasher works. But it isn’t the reason not to use it. Right?

We have one simple question.

Are high-frequency trading influenced based on who is paying the most?

Opponents of HFT say that it can produce big market swings.

Also, that HFT may result with an advantage for institutional investors.

Yes, engaging some HFT firm will cost you money. But, as far as we remember, only very rich houses had a dishwasher when it entered the scene. Today, it is almost impossible to find a house without it.

Even better, smaller retail investors may have benefits.


HFT brings liquidity to the market.

High-frequency trading grows the market intensity and liquidity and reduces volatility.

And, there are also ordinances that require brokers to execute trades at the best price for the traders.

Considering the Robinhood’s increasing in income, well we have to say it isn’t so big as some the opponents want to say.
Also, HFT firms didn’t record such a big increase in order-routing income. For instance, TD Ameritrade had a 43% growth in this sector in one year.

And one note for the opponents of HFT.

HFT is not a trading strategy. It is the practice of advanced technology that plays traditional trading strategies. The particular trading strategies need to be evaluated rather than HFT as such.

Hence, any strategy that has a conflicting influence on market integrity or enables market abuse, has to be are completely reviewed.

And to quote our post HFT STRATEGIES – THE TIPS AND SECRETS: “Technology by itself is without morality. The people are those who can add it to high-tech.”

Don’t waste your money!

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