Robinhood’s cash cow under SEC scrutiny amid IPO filing

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Buying and selling platform Robinhood may lose a big income supply ought to the USA Securities and Alternate Fee (SEC) transfer to ban the controversial fee for order flows (PFOF) — routing retail buying and selling orders to market makers.

Brokers like Robinhood typically use the observe to offset buying and selling charges thus offering zero fee buying and selling to its retail buyer base.

Based on the Wall Road Journal on Wednesday, Robinhood’s preliminary public providing (IPO) submitting revealed that the dealer earned 81% of its Q1 income from fee for order flows overlaying inventory, choices and crypto. As beforehand reported by Cointelegraph, Robinhood filed for its IPO on Thursday, July 1.

SEC Commissioner Gary Gensler has beforehand criticized the observe and the Gamestop saga from earlier within the yr has additionally put the matter within the highlight. Certainly, the corporate paid a $65 million effective imposed by the SEC again in December amid allegations that Robinhood misled retail clients about using PFOF.

In the meantime, Robinhood has said that any SEC motion towards PFOF, together with stringent rules or an outright ban, may negatively affect its enterprise. Fee for order move is a banned observe in jurisdictions like Canada and the UK.

The uncertainty over the SEC’s stance on PFOF underneath Gary Gensler is the newest hurdle for Robinhood in its IPO journey. Again in June, the Fee’s inquiry into the corporate’s crypto buying and selling enterprise reportedly delayed its IPO submitting.

Associated: Going through $70M in fines from regulators, Robinhood recordsdata for IPO

Certainly, Robinhood’s crypto division has skilled vital progress in 2021 with its Q1 efficiency constituting a sixfold improve over the earlier quarter. Again in April, the corporate introduced a brand new chief working officer to supervise its increasing cryptocurrency buying and selling operations.

As beforehand reported by Cointelegraph, the U.S. Monetary Business Regulatory Authority fined Robinhood $70 million again in June. The FINRA effective was reportedly resulting from “widespread and vital hurt” attributed to the corporate towards hundreds of its customers.