PODCAST: How Pay For Order Flow and RobinHood Robbed Retail

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The other day, it came across the wire that The SEC may change market structure for brokerages and prohibit Pay for Order Flow. The time is right to review this podcast GoldFix founders heard this August 2021 and understood better the implications of the PFOF crimes being committed. At this point we are unlocking it for all.

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This practice has long and deep history of making the playing field unbalanced. Here is a history lesson and detailed explanation of how it works from 1999 to present day.

This came about originally due to extensive coverage by Zerohedge on the process and the implications of Robinhood’s relationship with certain marketmaking firms in 2020-2021

Premium MasterClass: Pay for Order Flow

Originally posted to GoldFix Founders

On Sundays 3 p.m. to 5 p.m. GoldFix offers Founding Members a masterclass on markets. Topics range from  market structure, to Bitcoin, to understanding complex concepts discussed on Zerohedge (like  RRPs), SpotGamma (Short Squeeze dynamics), and some Crypto concepts. Much  of the Masterclass content is in response to questions asked during the week by Founders.

Those are frequently about the concepts ZH brings up. When Robinhood was "robbing" its clients last summer, people asked  for help understanding the problem. Here is that discussion unlocked for public use.

How RobinHood "Robs" Retail

How the “Pay for Order Flow (PFOF) business tactic undermines the free market system.

  1. History- evolution and origins  of PFOF from 1999 to present day. With lived through examples

  2. Legitimacy- where it is warranted, and where  it is not

  3. Moral Hazard- the present day license to steal behavior

  4. RobinHood- How it disincentivizes pricing and fairness.. and abuses the public trust

This is a 2 hour University level discussion with VBL and Founder subscribers from August 1st. Using career examples, market structure knowledge, and current events, VBL shows how the PFOF model has evolved from 1999 through today. “It is eye-opening” as one person said afterwards.

This class is long, detailed, and responsive to questions as the GoldFix community had asked. It should clear up gaps in understanding of the practice's mechanics. The podcast is part history, part market structure, and part autobiography.

***These materials will be used for a Graduate class on Futures and Options in Finance Fall 2022***

Note: This can be listened to without watching the screen. Most of the visual aids are below. Enjoy.

Slide 1- Table of Contents…

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Slide 2- Marketshare is key to Marketmaking success…

Slide 3- PFOF Undermines due diligence…

Slide 4- The 1999 Quad listing in stocks exploded the model…

Slide 5- How Dark Pools mask non competitive markets with best execution…

About VBL

There are over 30 Founder’s Sessions in the archives now. Below is a list of 5 of the most popular. These are accessible with Founders Subscriptions.

GoldFix
PREMIUM: 5 Founders Masterclass Recordings
Good Afternoon. Hope everyone had a good Thanksgiving and are enjoying the Holiday season starting with Hanukkah. - VBL Founders Masterclass Recordings We are in the process of editing and cataloguing the 15 or so Sunday discussions done since July 2021. Here are 5 Founders Masterclass recordings all in one post. Passwords have been changed and are at bottom of the post…
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