FINRA fines Robinhood with $1.25m for dubious execution processes

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FINRA has recently fined Robinhood with a $1.25 million for execution lapse processes. The California-based unicorn that offers commission-free trading servings to its clients has reportedly violated certain execution processes.

What FINRA found out is that the execution price on the app was not updated in the proper way, an act that caused price disruptions for clients. In particular, the equity orders were misrepresented and thus, equity traders faced trouble when placing their orders.

The $1.25 million fine is related to the fact that Robinhood failed to supervise the execution processes related to price discrepancies. More specifically, the discrepancy was a “payment for order flow” one that occurred in the period between October 2016 and November 2017. According to press, such discrepancy is viewed as a very serious one and one that involves the sale of clients’ trades to trading firms.

Robinhood was allegedly involved in this controversial practice and the entire reputation of the company was frowned upon in the trading community. According to FINRA, Robinhood provided specific details of clients’ equity orders to 4 broker-dealers. In return, these trading businesses paid the company for providing them with such information. According to press, Robinhood made approximately $70m with this practice in 2018.

What is known for now is that all order categories were violated, including stop and limit orders. Nevertheless, Robinhood denies the allegations.

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