How Robinhood, such a small broker(when started) can penetrate in trading brokerage business with great success with ZERO commissions for Stocks as well as Options, while these big old trading brokerage like TD Ameritrade, Fidelity, etc still charging commissions for Stocks/Options.
Payment for order flow. Your "free" order is routed to a company that somehow hasn't had a losing quarter in a long time. It's almost as if they're rigging the trades in their favor....
I use ten different brokers and Robinhood works just as well with limit orders. Why pay $50 to $175 for 100 contracts if I am taking my sweet time? I don’t see any benefits using direct access except for emergency speed and piercing the NBBO. It’s happened too many times. Paying $1.20+ per contract to get screwed, so great!
Thanks. I have had orders in my direct access fill at $3.50 when the bid x ask was $2.80 x $3.00 while my PFOF stayed in the NBBO. They will say “Your Esignal, DAs , Etrade, ect data were data lagging or it was a fast stock?” Yeah, all four data feeds and Time/Sales were corrupt.
It may not matter much if you are trading SPY options which are .02 wide, but it does with most other options. If you enter a limit order with RH in a less liquid option that is not filled immediately, its going to most likely be routed to an exchange that will pay to add liquidity/charge to take liquidity. This means you are less likely to be filled here vs if it was routed to an exchange that doesn't charge to take liquidity. I can direct route my orders to any exchange. I will often see an order not filled on one exchange where it will on another. I will typically start with the CBOE (no payment for adding liquidity) . If I am filled, I will send to another exchange where I get rebates. Often, I won't be filled there and will have to go back to the CBOE.
I use to trade for ECN rebates(50,000 x -.0027-.0029) for years, too much work but it added up on stocks before algos. I see the higher rebate option Exchanges not get hit on OPRA window unless the stock move’s hard. I tweak to NYSE, PHX, BOX or AMEX.