It is structurally different from but conceptually similar to the mark up you pay when you exchange currency.
No free lunches, as they say.
edit: See http://en.wikipedia.org/wiki/Payment_for_order_flow and http://www.sec.gov/answers/payordf.htm
I can just imagine it now, a week after some viral video knocking a company, they find out it was orchestrated by some Wall St types to make their quarterlies.
A 'no fee' app called Robinhood, something tells me it's not the banks that are getting robbed. Can't wait til they open this up to pink sheets.
I don't know how they are going to make money any other way, but their vague handwaving about it sure is suspicious. If they are going to make most of their money from rebates are they going to prevent people from taking liquidity?
[edit] chollida1 confirms that they are selling order flow: https://news.ycombinator.com/item?id=8358217
I'm sure is not like this and the broker won't deny any transaction if I were the broker I would just get a commission on some transactions by third parties but I don't see what I could change in order to get a greater commission.
could you elaborate please, I'm at a lost.
The customer is usually none the wiser as they are being charged the same fee from their broker typically regardless of the routing. The only way a customer would know is if the broker discloses it to them. In the US equities markets that disclosure is a legal requirement.
Definitely nothing is free!
Are you suggesting the customer's orders will not be filled at the NBBO? Or something else? Can you state explicitly (i.e., describe the timeline) of what you think is happening?
...mark up the prices their customers are paying for securities.
It would have been much more accurate to say that the broker is benefiting from part of the spread. Of course, one expects a service provider to benefit from providing a service.
This is also true of exchanging currencies and everything else in the capitalist circle of life -- so it was very possibly not a useful comment.
[1] What is the opposite of adverse selection? Advantageous selection?
The customer will get the exact same price as if his order went to the public exchanges. The only difference is that instead of selling to anonymous person on BATS, he'll sell to anonymous HFT on the broker's internal dark pool.