A girl holds a smartphone with the Robinhood brand within the background.
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Shares of retail brokerage Robinhood moved larger on Thursday after a report that U.S. regulators would not ban payment for order flow, a key a part of the corporate’s business mannequin.
Bloomberg News reported that the Securities and Exchange Commission would cease wanting banning payment for order flow, although the regulatory company should make rule modifications that may decrease the profitability of the follow.
Shares of Robinhood had been up 2.4% in morning trading.
Payment for order flow is a controversial follow that successfully permits market makers and brokerage corporations to separate the revenue made on trades from retail prospects. It is a key income for Robinhood and different low-cost brokerage corporations, and it helps them provide trading with no upfront price.
SEC Commissioner Gary Gensler has been vital of the follow, questioning whether or not the payment relationships between market makers and brokerage corporations was hurting the execution value for buyer trades.
“Our markets have moved to zero commission, but it doesn’t mean it’s free. There’s still payment underneath these applications. And it doesn’t mean it’s always best execution,” Gensler instructed CNBC’s “Squawk on the Street” final yr.
Robinhood and the SEC did not instantly reply to requests for remark.