Robinhood Shares Tank After SEC Announcement and PayPal Shares Rise After Surprising News
On Monday, shares of Robinhood tanked, closing down 6.89%.
Shares of the American financial services company fell after the Securities and Exchange Commission announced it might ban payment for order flow.
A brokerage company’s profit for routing orders to other parties for trade execution is known as payment for order flow (PFOF). As compensation for routing the transaction to a certain market maker, the brokerage company receives a tiny payment, generally fractions of a cent per share.
PFOF is a top revenue generator for Robinhood, so the stock fell after the announcement. SEC Chairman Gary Gensler said, “They get the data, they get the first look, they get to match off buyers and sellers out of that order flow. That may not be the most efficient markets for the 2020s.”
Shares of Robinhood are up 15% in the past month.
On Monday, shares of PayPal rose, closing up 3.64%.
Shares of the American financial services company rose after a surprise report was released that revealed PayPal’s possible dive into the stock trading business.
According to two individuals familiar with the plans, after allowing users to trade cryptocurrency last year, PayPal has been looking into methods to allow users to trade specific equities.
According to one of the individuals, PayPal recently recruited brokerage industry veteran Rich Hagen as part of the move. Hagen is now the CEO of Invest at PayPal, a previously unknown subsidiary of PayPal. Hagen was a co-founder of TradeKing, an online brokerage that was acquired by Ally Invest.
Shares of PayPal have risen 23% this year.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.