[betadreamer]

What's so bad about this? Other trading firms are also using HFTs. I assume Robinhood is making more because they have more trading than other companies. It sounds like a good strategy. I don't see a red flag in this.

[treyfitty]

I think the implicit assumption is that HFT firms place a negative externality on the overall stock market in a manner which CAN distort the value of holding the set of equities being traded. As a hypothetical example, if 90% of Robinhood customers bought into a pump and dump scheme, and HFT wrote the algorithm to perfectly go long at the perfect time, and accordingly sell at the perfect time, then the less educated investors would essentially be subsidizing the HFT firms ability to turn a hefty profit. This kinda isn’t so much a problem by itself. It’s when the dump in the pump and dump is exacerbated by the HFT firms, which wipes out all of the Robinhood investors positions: Robinhood facilitated trading -> millennials bought into a false hype -> HFT knew this could happen and wrote an algorithm to capitalize on the inevitable correction, and slurped up the mismatched price difference contributed by these investors.

If this is the implicit assumption, the article still falls victim of a slippery slope fallacy by letting readers believe “if Robinhood does this, what other companies can sprout up to encourage HFT exploitation?” Regardless, the article points to a good discussion in the direction of “at what point do we expect HFT to be the only way to benefit from the stock market?”

[betadreamer]

I see the issue after digging in more. The problem is that Robinhood claims they make money by investing in fund with extra savings, however they failed to address how they are "really" making the money. I always doubted how they make money and now I know.

What's even more surprising is that other company like E-Trade costs money AND they sell it to HFTs.