Robinhood’s money cow below SEC scrutiny amid IPO submitting
Trading platform Robinhood might lose a major income supply ought to the United States Securities and Exchange Commission transfer to ban the controversial cost for order flows (PFOF) — routing retail buying and selling orders to market makers.
Brokers like Robinhood typically use the observe to offset buying and selling charges, thus offering zero fee buying and selling to its retail buyer base.
According to the Wall Street Journal on Wednesday, Robinhood’s preliminary public providing submitting revealed that the dealer earned 81% of its Q1 income from cost for order flows masking inventory, choices and crypto. As beforehand reported by Cointelegraph, Robinhood filed for its IPO on Thursday.
SEC Commissioner Gary Gensler has beforehand criticized the observe, and the GameStop saga from earlier within the yr has additionally put the matter within the highlight. Indeed, the corporate paid a $65million effective imposed by the SEC again in December amid allegations that Robinhood misled retail clients about the usage of PFOF.
Meanwhile, Robinhood has said that any SEC motion towards PFOF, together with stringent laws or an outright ban, might negatively affect its enterprise. Payment for order movement is a banned observe in jurisdictions equivalent to Canada and the United Kingdom.
The uncertainty over the SEC’s stance on PFOF below Gensler is the newest hurdle for Robinhood in its IPO journey. Back in June, the SEC’s inquiry into the corporate’s crypto buying and selling enterprise reportedly delayed its IPO submitting.
Related: Facing $70M in fines from regulators, Robinhood recordsdata for IPO
Indeed, Robinhood’s crypto division has skilled vital progress in 2021 with its Q1 efficiency constituting a sixfold enhance over the earlier quarter. Back in April, the corporate introduced a brand new chief working officer to supervise its increasing cryptocurrency buying and selling operations.
As beforehand reported by Cointelegraph, the U.S. Financial Industry Regulatory Authority fined Robinhood $70 million again in June. The FINRA effective was reportedly on account of “widespread and significant harm” attributed to the corporate towards hundreds of its customers.