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It means they are handing over your transaction to HFTs, who can then see your transactions ahead of everyone, and buy the stock right before and then sell to you for a higher price. Imagine you just issued a BUY order at market price; they can buy at $99.9 and sell to you for $100, making a $0.01/stock profit. Rinse and repeat millions of times per day.

This is very similar to "front running" [1], but because a) this happens privately and in small quantities, and b) it is not necessarily privileged information, it's considered legal by the SEC. But it is highly questionable for sure.

"Flash Boys", by Michael Lewis [2] is a great read, and goes into detail on the world of high frequency traders, and how they operate.

[1] https://en.wikipedia.org/wiki/Front_running

[2] https://www.amazon.com/Flash-Boys-Wall-Street-Revolt/dp/0393...




As long as it's 1 cent no single individual will care. As long as it's less than what a person would pay per trade elsewhere then both sides sort of win I guess...

The problem I suppose is the poor chaps don't know this is what is happening.


This doesn't sound like it's fucking me, though. I'm still getting the stock for exactly what I asked, correct? I mean, hasn't Robin Hood always been upfront that they make money on the discrepancy between what buyers are willing to pay versus what sellers are willing to take? It's still a free service to me.


> hasn't Robin Hood always been upfront that they make money on the discrepancy between what buyers are willing to pay versus what sellers are willing to take?

No, they are quite clear on how they make money and that is not it. They, officially, make money on interests and a subscription service [1].

[1] https://support.robinhood.com/hc/en-us/articles/360001226106...




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