![]() ![]() The SEC ruling will require brokers (like Robinhood) to send marketable stock orders of US$200,000 or less into auctions (which each take perhaps three-tenths of a second) where high-speed traders and institutional investors compete to fill the orders at the best prices. An online broker can still route orders to a wholesaler under the amended rules, but the conditions for doing so are tough. Wholesalers must be able to beat a key price metric linked to auction behavior. Alternatively, wholesalers could be utilized in the unlikely event of auction failure. READ: SEC’s Adverse Decision on Payment for Order Flow Negatively Impacts Robinhood Remarkable for its omission in either Robinhood’s earnings release or its presentation slides was any mention of a December 2022 SEC decision which significantly undercuts the future usage of payment for order flow (PFOF) and will likely be implemented sometime after 1Q 2023. PFOF revenue comprised nearly 40% of Robinhood’s total 4Q 2022 revenue. PFOF is derided by full-service (commission-charging) brokers who contend that the practice results in a less favorable transaction price for the online broker’s clients. Robinhood investors seem enthused that Robinhood’s Board of Directors authorized the repurchase of the 55 million shares that FTX/Sam Bankman Fried bought in May 2022. Such a purchase would cost around US$575 million at current prices. (in thousands of US dollars, except where otherwise noted) ![]() READ: Robinhood Loses $57 Million On “Processing Error,” Plans To Buy Back Sam Bankman-Fried’s 55 Million SharesĪnother positive: Robinhood’s cash balance increased to US$6.3 billion as of December 31, 2022, up around US$150 million from September 30, 2022. Robinhood’s net cash position of US$6.2 billion equates to about two-thirds of its US$9.4 billion market capitalization. Helped by another jump in net interest revenue, a non-trading source of revenue, Robinhood’s adjusted EBITDA was positive US$82 million in 4Q 2022, its second successive quarter with positive adjusted cash flow after a string of four consecutive negative periods. (NASDAQ: HOOD) announced 4Q 2022 results which were about in line with analysts’ forecasts. The company reported 4Q 2022 diluted EPS of (US$0.19) versus expectations of (US$0.15). A mistake processing a trade hurt Robinhood’s earnings in the quarter by US$0.07 per share. After the markets closed on February 8, Robinhood Markets, Inc. ![]()
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