-
Shares of Robinhood (HOOD, $9.65) rose to more than 10% in morning trading after a report that the US Securities and Exchange Commission (SEC) would stop short of banning payment for order flow. However, it did fall 2.7% overall despite its fast start to the day.
-
Payment for order flow is a critical source of revenue for Robinhood. Through the practice, brokerages route many of their customers' orders to a few big electronic trading firms such as Citadel Securities and Virtu Financial Inc. and collect payments from those firms in return.
-
The structure has come under regulatory scrutiny following the 2021 meme stock frenzy, with critics like SEC chairman Gary Gensler arguing it has contributed to creating unfair conditions for retail traders.