Robinhood

From Citadel Securities to Tastyworks: The New Economics of Liquidity, Part 1

"The real voyage of discovery consists, not in seeking new landscapes, but in having new eyes." - Marcel Proust   The data contained in the revised SEC Rule 606 reporting has landed like a transparency bomb for those few of us who try to make sense of complex - and historically opaque - market structure issues; perhaps even more so for those fewer of us that are able to triangulate on the strategic movements of the various players by weaving additional insight from multiple datasets. Add the moves of the largest retail brokerage platforms, in particular, to a zero-commission paradigm off the back of the controversially-successful Robinhood platform, and we have a potent cocktail made of disruption and intrigue. For those of you that have been following along recently, Alphacution has toggled widely between intense fixation on these themes - with our latest Robinhood-related Feed posts, "Phenomenon: On This Score, Robinhood Now Exceeds E*Trade, Others" and "Trick Shot: Robinhood Underwrites MEMX" and our recent contributions to the July 8 New York Times [...]

By | 2020-07-10T00:16:18+00:00 July 9th, 2020|Alphacution Feed|

Phenomenon: On This Score, Robinhood Now Exceeds E*Trade, Others

"It is a mistake to look too far ahead. Only one link of the chain of destiny can be handled at a time." - Winston Churchill   The holidays, with all of its gift-giving elves, came early this year with new data; data that I have been crunching non-stop for the past week - and will likely continue to crunch in the week ahead. The exercise has yielded one "I-shit-you-not" revelation after another after another, almost as if such a trove could not exist in the public domain lying around for free. However, rather than fully unwrap any of these gifts right hear and right now (and go through the instructions in detail), I'm just going to set this one down under the tree for the weekend... Until next time...

By | 2020-06-25T23:57:33+00:00 June 25th, 2020|Alphacution Feed|

Trick Shot: Robinhood Underwrites MEMX

“Principles for the Development of a Complete Mind: Study the science of art. Study the art of science. Develop your senses - especially learn how to see. Realize that everything connects to everything else.” - Leonardo da Vinci   If there ever was a time to see how things are connected to other things, it is now. This is particularly true in places where something that is "free" is interpreted to be "without cost." After all, like "free" drinks at the casino, human nature tends to regress to its most lizard-like tendencies when presented with a frictionless environment... When will we ever learn that "free" is never the best price? Anyway, without becoming distracted by a rant about the true cost of Facebook, et al, let's take a brief look at the impact of "commission-free" trading on the macrostructure of the US market ecosystem over a very short window since October 2019: Thanks, in large part, to the popularity of retail broker, Robinhood Financial, LLC ("Robinhood) - the upstart financial [...]

By | 2020-06-18T00:20:58+00:00 June 18th, 2020|Alphacution Feed|

Implications: 2019 Payments For Order Flow Flat vs. 2018

"Historians study the past not in order to repeat it, but in order to be liberated from it." - Yuval Noah Harari, Homo Deus: A Brief History of Tomorrow   With three quarters worth of financial reports for calendar 2019 long in the bag, it is not much of a courageous leap for us to deliver an estimate for order routing revenue - otherwise more notoriously known as payment for order flow (PFOF) - for the full year. And, with the quarterly earnings season coming in the month ahead, it won't be long before we are able to test the accuracy of this estimate. In the chart below, Alphacution extends our prior analysis not only to include 2011 and 2012 but also, more relevantly, to include the year just completed; thereby extending to nine years from six our focus on five of the primary players in retail order flow for US equity markets who also disclose order routing data: TD Ameritrade (soon to be acquired by Charles Schwab); E*Trade; the [...]

By | 2020-03-01T22:37:59+00:00 January 15th, 2020|Alphacution Feed|

Virtu, ITG: Much More Than Meets The Eye…

"The real voyage of discovery consists, not in seeking new landscapes, but in having new eyes." - Marcel Proust (1923) “Develop your senses — especially learn how to see. Realize that everything connects to everything else.” — Leonardo Da Vinci (~1500) If you  - like the precious thousands of other professionals, mostly notably from the high-performance end of the global trading spectrum, who will venture this way - have come this far in search of Alphacution's unique brand of irreverent spin on Virtu's 3rd quarter earnings announcement, then you are about to miss most of the intelligence that is on offer from the growing portfolio of evidence that we are assembling here. Yes, our modeling and charting and narratives surrounding this latest catalyst from Virtu - along with its and others' exploits in this rare corner of the financial world - can be found here and throughout our Feed. But, for those who choose to stretch their go-to frame of perspective, there is much more going on here than initially meets the eye... What is actually going on [...]

By | 2018-11-15T00:10:58+00:00 November 15th, 2018|Alphacution Feed|

Robinhood and Payments for Order Flow

It was a recent father-son (and dog) road trip. Several hours in the car, on our way to support daughter / sister, Emma, at her final regatta of the season. Head of the Hooch in Chattanooga, Tennessee. And, an opportunity for some undistracted conversation. Among the many topics was our ongoing debate about how to trade Tesla (TSLA). Eddie has proven himself to be fairly decent scalper of this volatile name, so I usually ask how he is positioned and the levels he thinks are meaningful. Anyway, it turns out, he is trading on the Robinhood platform - no more than a few shares at a time - and paying zero commissions which, of course, improves his net profitability. This is the main attraction on top of the fact that he can toggle between trading stocks, playing video games, watching YouTube, Instagramming with his friends and listening to music all on the same device. (No wonder he is always wiped out!) So, this got me to thinking about some of [...]

By | 2020-03-01T21:53:43+00:00 November 14th, 2018|Alphacution Feed|