Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Biden's Wall Street cop is putting Robinhood on notice

Biden's Wall Street cop is putting Robinhood on notice

Gary Gensler, the newly installed chairman of the Securities and Exchange Commission, put Robinhood and Citadel Securities on notice Thursday about a potential crackdown in the Biden era.

Gensler, whose nomination was endorsed by Senator Elizabeth Warren, repeatedly expressed concern about the "inherent" conflicts of interest that exist in the payment-for-order flow business model used by Robinhood and other brokerages that don't charge commissions.

"These are not free apps. They are just zero-commission apps. The cost is inside the order execution," Gensler told lawmakers during the latest congressional hearing investigating the GameStop saga.

The controversial trading restrictions imposed by Robinhood earlier this year drew attention to how some brokerages receive revenue in exchange for routing orders to high-speed trading firms like Citadel Securities.

Gensler, who was known as the toughest regulator of the Obama era, promised to "take a closer look" at payment for order flow and noted that both Canada and the United Kingdom banned the practice. He also pointed out that not all zero-commission trading apps use the business model.

Robinhood and others in the industry argue zero-commission trading has created huge savings for individual investors and opened up trading to the masses.

Yet critics worry that it's really the big Wall Street players that are winning out. Gensler's comments suggest he sympathizes with that concern.

"There are costs. It's like an iceberg: Most of the iceberg is below the surface," the SEC chief said. "The costs are below the surface."

'Dominant' position held by Citadel Securities


Gensler also pledged to look into concerns about the broader structure of the modern stock market, including the "dominant" position held by Citadel Securities, the market maker owned by billionaire Ken Griffin.

The SEC chairman specifically called out the fact that Citadel Securities executes a staggering 47% of all retail trade volume. The Chicago firm is the biggest source of revenue for Robinhood.

"Concentration could lead to more fragile markets, meaning less orderly, and also more costly or less efficient, markets. That's what history and economics tell us when we get concentration," Gensler said.

Moreover, Gensler signaled concern about the information Citadel Securities holds due to its dominant position.

"There is one online search engine in America that most of us go to. That firm has data advantages," he said. "Now, in the middle of our capital markets, one firm in the retail order flow may have growing data advantages over other market participants."

Isaac Boltansky, director of policy research at Compass Point Research & Trading, said the talk about market concentration "will be a concern for Citadel" going forward.

"The dial was turned one peg louder on the concentration issue," Boltansky said in an email.

Citadel Securities has previously suggested it doesn't care about the fate of payment for order flow.

"We simply play by the rules of the road," Griffin said during a February hearing on GameStop. "If they choose to change the rules of the road, we need to drive on the left side versus the right side, that's fine with us."

A Citadel Securities spokesperson declined to comment.

Game-like features in trading


Like other regulators, Gensler expressed unease over the embedding of game-like features into trading apps to increase customer engagement. He asked SEC staff to look into these issues.

Regulators in Massachusetts have accused Robinhood of using images of confetti and other techniques to "entice and induce inexperienced customers into risky trading." Massachusetts is seeking to revoke Robinhood's broker-dealer license in the state — a move the startup fiercely opposes. Robinhood has
recently ended its practice of using confetti to celebrate first trades and other milestones.

Gensler noted that this so-called gamification is not exclusive to trading apps, though the stakes are higher.

"The streaming apps figured out a long time ago that I'm kind of a rom-com guy," said Gensler. "You thought I was a thriller guy, but it's rom-com. If I lose an hour and a half and it was a lousy rom-com, alright."

Yet gamification in trading can have more significant effects on investors' finances, Gensler argued.

Robinhood's representatives were not immediately available to comment on the hearing.

The trading app has repeatedly defended itself by pointing to how its platform allowed countless new investors to participate in financial markets.

"We look forward to engaging with the SEC as they consider matters involving retail investors and market structure," Robinhood said in a statement. "To the extent the SEC decides that regulatory changes may be necessary, we intend to participate through the public notice and comment rulemaking process."

Despite the increased scrutiny, Robinhood continues to enjoy explosive user growth, especially in cryptocurrencies. The startup confidentially filed to go public in March, setting the stage for a highly anticipated IPO.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Trump Called Viktor Orbán: "Why Are You Using the Veto"
Horror in the Skies: Plane Engine Exploded, Passengers Sent Farewell Messages
AI in Policing: Draft One Helps Speed Up Reports but Raises Legal and Ethical Concerns
Shame in Norway: Crown Princess’s Son Accused of Four Rapes
Apple Begins Simultaneous iPhone 17 Production in India and China
A Robot to Give Birth: The Chinese Announcement That Shakes the World
Finnish MP Dies by Suicide in Parliament Building
Outrage in the Tennis World After Jannik Sinner’s Withdrawal Storm
Class Action Lawsuit Against Volkswagen: Steering Wheel Switches Cause Accidents
UK Government Tries to Sue 4chan for Breaching Online Safety Act
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Miles Worth Billions: How Airlines Generate Huge Profits
Cambridge Dictionary Adds 'Skibidi,' 'Delulu,' and 'Tradwife' Amid Surge of Online Slang
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
The CEO Who Replaced 80% of Employees for the AI Revolution: "I Would Do It Again"
"Every Centimeter of Your Body Is a Masterpiece": The Shocking Meta Document Revealed
Character.ai Bets on Future of AI Companionship
China Ramps Up Tax Crackdown on Overseas Investments
Japanese Office Furniture Maker Expands into Bomb Shelter Market
Intel Shares Surge on Possible U.S. Government Investment
Hurricane Erin Threatens U.S. East Coast with Dangerous Surf
EU Blocks Trade Statement Over Digital Rule Dispute
EU Sends Record Aid as Spain Battles Wildfires
Beijing is moving into gold and other assets, diversifying away from the dollar
China Requires Data Centres to Source Majority of AI Chips Locally, For Technological Sovereignty
Escalating Clashes in Serbia as Anti-Government Protests Spread Nationwide
Category 5 Hurricane in the Caribbean: 'Catastrophic Storm' with Winds of 255 km/h
Trump Backs Putin’s Land-for-Peace Proposal Amid Kyiv’s Rejection
Digital Humans Move Beyond Sci-Fi: From Virtual DJs to AI Customer Agents
YouTube will start using AI to guess your age. If it’s wrong, you’ll have to prove it
Jellyfish Swarm Triggers Shutdown at Gravelines Nuclear Power Station in Northern France
OpenAI’s ‘PhD-Level’ ChatGPT 5 Stumbles, Struggles to Even Label a Map
Zelenskyy to Visit Washington after Trump–Putin Summit Yields No Agreement
High-Stakes Trump-Putin Summit on Ukraine Underway in Alaska
The World Economic Forum has cleared Klaus Schwab of “material wrongdoing” after a law firm conducted a review into potential misconduct of the institution’s founder
A Computer That Listens, Sees, and Acts: What to Expect from Windows 12
Bitcoin hits $123,000
Southwest Airlines Apologizes After 'Accidentally Forgetting' Two Blind Passengers at New Orleans Airport and Faces Criticism Over Poor Service for Passengers with Disabilities
United States Sells Luxury Yacht Amadea, Valued at Approximately $325 Million, in First Sale of a Seized Russian Yacht Since the Invasion of Ukraine
Russian Forces Advance on Donetsk Front, Cutting Key Supply Routes Near Pokrovsk
It’s Not the Algorithm: New Study Claims Social Networks Are Fundamentally Broken
Sixty-Year-Old Claims: “My Biological Age Is Twenty-One.” Want the Same? Remember the Name Spermidine
Saudi Arabia accelerates renewables to curb domestic oil use
The Billion-Dollar Inheritance and the Death on the Railway Tracks: The Scandal Shaking Europe
World’s Cleanest Countries 2025 Ranked by Air, Water, Waste, and Hygiene Standards
Denmark Revives EU ‘Chat Control’ Proposal for Encrypted Message Scanning
Perplexity makes unsolicited $34.5 billion all-cash offer for Google’s Chrome browser
Cristiano Ronaldo and Georgina Rodríguez announce engagement
×