Robinhood jumps, then loses steam after report that SEC will not ban payment for order flow

A girl holds a smartphone with the Robinhood brand within the background.

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Shares of retail brokerage Robinhood had been little modified on Thursday, giving up early positive aspects, 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 in need of banning payment for order flow, although the regulatory company should still make rule modifications that may decrease the profitability of the apply.

Shares of Robinhood had been up lower than 1% in noon trading after being up greater than 11% earlier within the session.

Payment for order flow is a controversial apply that successfully permits market makers and brokerage companies to separate the revenue made on trades from retail prospects. It is a key income for Robinhood and different low-cost brokerage companies, and it helps them supply trading with no upfront value.

SEC Commissioner Gary Gensler has been vital of the apply, questioning whether or not the payment relationships between market makers and brokerage companies 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 advised CNBC’s “Squawk on the Street” final yr.

Robinhood and the SEC did not instantly reply to requests for remark.

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