WSJ: Robinhood facing SEC investigation over dealings with high-frequency trading shops

Popular millennial stock and options brokerage is said to be under civil fraud investigation into its failure to properly disclose how it routes client orders to high-frequency trading shops, according to The Wall Street Journal. 

Per the report, the investigation — conducted by the Securities and Exchange Commission — is in an "advanced stage" and could result in a $10 million fine. Robinhood makes a good portion of its revenues through a practice known as payment for order flow. Under a PFOF deal, a broker will sell off client order flow to high-speed traders like Citadel Securities, which internalizes and matches the orders. 

THE SCOOP

Keep up with the latest news, trends, charts and views on crypto and DeFi with a new biweekly newsletter from The Block's Frank Chaparro

By signing-up you agree to our Terms of Service and Privacy Policy
By signing-up you agree to our Terms of Service and Privacy Policy

A deal could be announced this month and "the two sides haven't formally negotiated a proposed fine," according to the Journal.

Robinhood has previously been slapped with fines relating to its order routing practices. At the end of 2019, FINRA announced  a $1.25 million fine against Robinhood for improperly routing orders. 

About Author

Frank Chaparro is Host of The Scoop podcast and Director of Special Projects. He also writes a biweekly newsletter. Chaparro started his career at Business Insider, where he specialized in the intersection of digital assets and Wall Street, market structure, and financial technology. Soon after joining Business Insider out of Fordham University, Chaparro was interviewing top finance and tech executives, including billionaire Mark Cuban, “Flash Boys” star Brad Katsuyama, Cboe Global Markets CEO Ed Tilly, and New York Stock Exchange President Tom Farley. In 2018, he become a sought after reporter in the crypto world, interviewing luminaries such as Tyler Winklevoss, the cofounder of Gemini, Jeremy Allaire, the CEO of Circle, and Fundstrat head Tom Lee. For inquiries or tips, email [email protected].