But he warned that the changes would hurt smaller competitors, noting that Webull relied heavily on PFOF in its early years. Moskowitz said.Īn SEC spokesman said members of the public could comment on the proposal through the agency’s website.Īnthony Denier, chief executive of Robinhood rival Webull, said his firm could find other ways to make money if payment for order flow dries up. “I’ve never seen a rule-making effort of this size and complexity and interconnectedness being done all at the same time, this quickly, with so little advance study and discussion,' Mr. He criticized the agency for pushing through sweeping changes with insufficient industry input. Quirk, Robinhood Deputy General Counsel Lucas Moskowitz said he expected the SEC to soften its proposals, which grew out of a review prompted by the frenzied trading in GameStop Corp. But other brokers might be forced to revive commissions, he added. “We’ll do everything in our power' to ensure that Robinhood doesn’t start charging commissions, Mr. The idea is to unleash competitive forces so investors get better prices. Their centerpiece is a plan to require retail brokerages to send many of their customers’ orders to auctions, where high-speed traders and other firms could compete to execute each order. The SEC says its proposals are aimed at getting investors a better deal on trades. During the third quarter of 2022, the company earned 43% of its total net revenue from payments for routing stock and options orders. Robinhood leans heavily on PFOF, even as it has begun to rely more on other revenue streams such as collecting interest on cash balances. “If you think about the ramifications of these proposals, you’re essentially shutting the door and saying we liked it better when it was the old boys’ club,' Robinhood Chief Brokerage Officer Steve Quirk said. But PFOF makes it possible for firms such as Robinhood to make money without charging commissions, and it opened the door to zero-commission trading, which brought millions of new investors into the stock market during the pandemic. Critics of the practice, including SEC Chair Gary Gensler, say it poses a conflict of interest for brokers.

Payment for order flow is a crucial part of the business model of Robinhood, which is set to report fourth-quarter results Wednesday.

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