Robinhood General Counsel Says SEC Won’t Ban Payments For Order Flow

Robinhood General Counsel Says SEC Won't Ban Payments For Order Flow

Robinhood’s general counsel, who worked at the SEC, said downstream payment brokerage directing transactions from clients to market makers is ultimately a boon for retail investors.

Dan Gallagher of Robinhood told CNBC’s “Squawk Box” on Monday that the Securities and Exchange Commission “will conclude that paying for order flow is undoubtedly a surprisingly good thing for retail investors and that they are going to do it. restrict”. Do not go.”

The checkout flow for orders is one of Robinhood’s biggest revenue streams and how the millennium’s favorite stock trading app is able to deliver commission-free trades. Paying for Order Flow is a controversial practice that has caught the attention of regulators and Main Street.

Restrictions on payment for the order flow are “on the table,” Gallagher said. “I think they will explore this issue further. I think that according to the law they will have to go through a very difficult process. “

SEC Chairman Gary Gensler told Barron’s last month that there is “an inherent conflict of interest” in paying for the flow of orders. Gensler said it was not fair to ban the practice.

“To Robinhood, [payment for order flow] No commission, no minimum balance is the lifeblood of the brokerage house. That’s what brought in a whole new generation of investors, ”said Gallagher. “I think the overwhelming evidence is that the current market structure is working well for retail investors.”

After an epic short squeeze on GameStop shares in January that forced Robinhood to limit trading in certain titles, Robinhood CEO Vlad Tenev was forced to testify before the United States House Financial Services Committee in February. . Lawmakers have criticized the payment of order flows for disputes with market makers such as Citadel Securities.

Gallagher said: “The idea that clients are stupid, that they need protection, that they need the government and state nanny to come out and protect them for making bad decisions, I think they are insulted. ” “

Gallagher told CNBC that if he was still working for the SEC, he would investigate the people and institutions he said lied around the shortening of Gamestop.

Robinhood shares were unchanged in pre-market trading, after closing at $ 41.17 on Friday.

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