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
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
×