Robinhood Considers Legal Action Against the SEC

Robinhood Markets plans to challenge the potential ban on payment-for-order-flow presented by the Securities and Exchange Commission.

The chairman of the Securities and Exchange Commission, Gary Gensler, announced on 30 August that a ban is “on the table” for a practice that fosters some of the popular free stock-trading applications. The practice Gensler considers banning is the payment for order flow in which large trading operations pay to execute trades for clients of retail brokerage companies.

Payments for order flow occur when a retail broker sends its client orders to a single market-maker instead of an exchange. Furthermore, they get a rebate from the wholesale broker in return. Robinhood says the payments allow commission-free trading to its 18 million customers. Nonethele...

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