Robinhood, the app that allows you to buy and sell stocks and cryptocurrencies, apparently sells data related to orders and volumes to HFT companies and does it a very high price, according to Logan Kane and the Zerohedge website.
This is a serious breach of the relationship of trust between customers and service providers.
This practice of selling data is practised in the industry, but not by everyone or at least not on such a large scale.
For example, Vanguard doesn’t give up data related to orders, while other companies like Ameritrade or Etrade obtain interesting figures regarding the total of the assets entrusted to trading.
The transfer of data happens through the canalization of the orders through HFT companies that, in this way, learn about volumes and the types of orders executed
The documentation deposited with the SEC reveals that the company receives a payment for each order that is channelled.
The reported data shows a commission of 0,00026$ for every dollar traded on RobinHood, a sum that becomes 260 dollars for every million dollars traded and that is paid by the HFT companies interested in buying the trading data.
RobinHood’s competitors, on the other hand, collect ten times less data of this type.
HFT companies benefit greatly from knowing, even just tenths of a second in advance, incoming orders because they are indicative of any market trends and allow the algorithms that govern the HFT to anticipate and take advantage of any price pumps or dumps.
Since the SEC does not require similar communications on cryptocurrencies, we do not know if this type of activity also occurs for virtual currencies, so the data of the orders are sold in bulk to professional operators who can then know, with significant advance, the incoming volumes.