Shares of retail brokerage Robinhood moved higher on Thursday following a report that U.S. regulators would not ban payment for order circulation, a crucial component of the company’s business enterprise model.
Bloomberg News claimed that the Securities and Trade Commission would prevent quick of banning payment for buy stream, nevertheless the regulatory agency might still make rule alterations that could decrease the profitability of the apply.
Shares of Robinhood were up 2.4% in morning trading.
Payment for order stream is a controversial exercise that properly makes it possible for marketplace makers and brokerage corporations to break up the revenue produced on trades from retail prospects. It is a essential supply of revenue for Robinhood and other minimal-price tag brokerage firms, and it aids them supply trading with no upfront charge.
SEC Commissioner Gary Gensler has been essential of the observe, questioning no matter whether the payment relationships in between market place makers and brokerage corporations was hurting the execution price for client trades.
“Our marketplaces have moved to zero fee, but it doesn’t suggest it is cost-free. There’s nonetheless payment beneath these programs. And it won’t mean it’s often finest execution,” Gensler informed CNBC’s “Squawk on the Road” final yr.
Robinhood and the SEC did not right away respond to requests for remark.
