SEC probes Robinhood about selling clients stock orders to high-frequency traders

The United States Securities & Exchange Commission is investigating Robinhood Markets over its sale of its clients’ stock market orders to high-frequency traders, according to the Wall Street Journal. Sometime in 2018, the company changed its website to more clearly explain how it makes money. It is unclear at this time as to whether any part of the investigation relates to possible “front-running” by the high-frequency traders, using the Robinhood stock orders to buy the same stock and wait until the market value shifts up based on the sales of those stocks. Front

running is a form of insider trading that is not considered legal and was the subject of Michael Lewis’s #1 New York Times bestsellers FLASH BOYS. Robinhood, which started in 2o13, offers no-fee stock trading. However, most of its money is made from selling its “order flow”, a practice apparently used employed by most retail brokerages in which they sell customer orders to high-speed traders. In October 2018, Bloomberg reported how Robinhood made almost half of its revenue from selling customers’ orders to firms including Citadel Securities and others.

Jeffrey Newman Esq. represents whistleblowers nationwide including SEC whistleblowers reporting regulation violations like front running. He can be reached at jeff@jeffnewmanlaw.com or at 617-823-3217.