Robinhood has slashed the percentage of orders it sends to Citadel Securities as competition among HFTs heats up | Short strategy helped Multicoin Capital post solid 2018 results

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The Big Block

Robinhood, a darling of millennial stock traders, has slashed the percentage of trades it sends to one of the largest high-frequency firms, a move that might reflect competition for Robinhood’s order flow among high-frequency trading firms is heating up. 

The firm, which is valued at $5.6 billion, makes 40% of its revenues by routing its clients’ orders to firms like Virtu Financial and Citadel Securities, according to estimates by Bloomberg. To be sure, almost every single one of Robinhood’s broker rivals — including TDAmeritrade and E*Trade — engages in the practice, referred to as payment for order flow. TDAmeritrade clients, for instance, alleged in a class-action lawsuit that the firm’s PFOF set-up prioritized HFTs over their best interests — charges TD disagreed with

Still, critics pointed out frequently at the end of 2018 that Robinhood has been unique inasmuch as it sent, at one point, the majority of its flow to one firm, Citadel Securities, and it makes far more than its rivals in payment for certain flows, as noted by The Wall Street Journal. This has raised questions about the execution-quality Robinhood is achieving for its clients. Brokers are required to achieve best-execution. CEO Vlad Tenev has defended the way his firm makes money, saying once in a blog post “we send your orders to the market maker that’s most likely to give you the best execution quality.”

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Around The Block

Short strategy helped Multicoin Capital post solid 2018 results

The Block can reveal exclusively that Multicoin Capital, the crypto hedge fund founded in 2017 by Kyle Samani and Tushar Jain, held up well in a brutal 2018 crypto market. According to the “Multicoin Capital 2018 Annual Letter,” a document that The Block received, Multicoin’s performance beat the relevant indexes — More

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