A popular online brokerage portal known for providing zero-commission services to millennial investors, Robinhood Markets Inc. has witnessed a sharp 7% fall in stocks after PayPal’s decision to enter the online brokerage sphere.
The global payment giant PayPal Holdings Inc. is looking forward to exploring the fast-developing domain of online brokerage, making the existing firms struggle to sustain their hold. The latest news reports highlight that PayPal is gearing up to facilitate the trading of individual stocks for U.S customers. The stocks of Robinhood Markets closed at a loss of 6.9% and traded at $43.64 value. The shares were offered for public trading in July and have managed to get a 25% surge since the launch event. The portal is known for offering a streamlined interface for trading to investors of varied levels. The portal became quite popular during the pandemic when people were forced to stay locked up at home for long.
According to speculations doing the rounds of the industry, the shares of Robinhood Markets dropped further in response to the interview of Gary Gensler, chief of SEC. The head of the U.S Securities and Exchange Commission talked about the infamous malpractice called PFOF prevalent in the brokerage industry. As part of the PFOF practice, retail brokerage firms like Robinhood move customer orders to wholesale brokers and not exchange portals.
The SEC chief added that the wholesale brokers get access to data analytics, trading modules, and the capacity to connect purchasers and sellers from the order flow they pay to retail brokerage firms. Gensler advocated that this system is not a profitable setup for the industry. Faulty practices like PFOF are increasing their profit levels by exchanging customer orders to trading portals rather than focusing on serving customer needs. However, in his interview, Gensler highlighted that the SEC has not come across incidents where the interest of traders is affected due to such practices functioned by online brokerage hubs.
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