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SEC Will Not Prohibit Payment for Order Flow

Theu.S. Securities and Exchange Commission (SEC) Reportedly Won't Seek to Ban Payment for Order Inflow (PFOF), Despite Before Suggestions That SEC Chair Gary Gensler Had Been Inclined To Issue Such A Prohibition. A Notable Winner from This Apparent Decision Is Online Broker Robinhood Markets, Inc. (HOOD), Whose Business Model Is Grounded On POF.12

In The Immediate Wake of The Report in Bloomberg News, Published Before the Request for Open Concept. 22, 2022, Shares of Robinhood Hit a High Of$11.07, Over By11.6 From the Previous Close. Still, By Late Morning the Stock Was Trading at Around$9.94, Reducing the Gain to About0.2. For The Time to Date In 2022, Robinhood's Shares Are Down by Roughly46.3

KEY TAKEAWAYS

• The SEC Isn't Going to Seek a Ban on Payment for Order Inflow (PFOF) At This Time, According to A Report In Bloomberg Onsept. 22, 2022.

• This Represents a Palm for Online Broker Robinhood (HOOD), But Its Shares Have Sunk After an Early Rally.

• Robinhood Has Paid Large Forfeitures in The History to The SEC And FINRA Over PFOF And Other Practices.

What Is Payment for Order Flow (PFOF)?

Some Request Makers and Exchanges Will Compensate Brokerage Enterprises for Routing Trades to Them. In General, The Further Trades That Request Makers and Exchanges Execute, The Lesser Will Be Their Trading Gains. Payment For Order Inflow (PFOF) Effectively Transfers Part of These Trading Gains To The Brokerage Enterprises Where These Orders Began.

Significance Of PFOF To Robinhood

A Crucial Element of Robinhood's Business Model Is Attracting Guests with The Pledge That They Won't Have to Pay Commissions on Trades. Rather, Robinhood Relies on PFOF As Its Primary Source of Profit. Critics Of The Practice Purport That PFOF Represents Retired Charges Eventually Borne by The Investor in The Form of Poorer Prosecutions (That Is, In the Form of Advanced Prices When Buying and Lower Prices When Dealing). Robinhood And the Request Maker That Receives the Utmost of Its Order Inflow Disputed This Charge in A 2021 Congressional Hail, Claiming That Robinhood Guests Get Better Prosecution Than Is Offered by The Exchanges.

Robinhood Fined Over Practices

In December 2020, Robinhood Agreed to Pay a A$ 65 million Fine to Settle Charges Raised By The SEC. The SEC Had Set Up" Repeated Misstatements That Failed to Expose the Establishment's Damage Of Payments From Trading Enterprises For Routing Client Orders To Them, And With Failing To Satisfy Its Duty To Seek The Stylish Nicely Available Terms To Execute Client Orders." This Enforcement Action Was Related to Conduct Taken by Robinhood Between 2015 And Late2018.4

In June 2021, The Financial Industry Regulatory Authority (FINRA) Assessed Penalties Totaling$69.6 million On Robinhood. FINRA Set Up That" During Certain Ages Since September 2016, The Establishment Has Negligently Communicated False and Deceiving Information To Its Guests. The False and Deceiving Information Concerned a Variety of Critical Issues." Still, PFOF And Trade Prosecutions Weren't Among the Issues Covered by FINRA's Complaint.5 Patronized

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