If I have understood it correctly, Matt Levine is arguing that some (much? most?) of the time the exact opposite is happening. Like: if the market maker is able to internalise a trade, there are some costs avoided and prices do become more competitive.
(Though it clearly isnāt quite as simple a model as that, because the SEC fined RH in the past as @Mattjns48 pointed out.)
Itās interesting to think about why the ānational best priceā isnāt the actual best price.
I have no view on whether PFOF is good or bad really - just trying to understand it.
āFreetrade is literally owned by its customers. We were crowdfunded into existence.ā Thats great but top VCs provide with guidance and resources. Founder Fund (AirBnB, SpaceX), Accel (Facebook, Slack, and Spotify) are backing Trade Republic. Advice: get top VCs on board and expand into the Eu faster than competition.
PFOF stuff:
Freetrade uses Drivewealth for US stonksā¦ Drivewealth uses payment for order flow. How do I know? hereās what CashApp (by Square $SQ) says about Drivewealth in its legal: āWe receive a portion of the payment for order flow (PFOF) earned by our carrying partner, DriveWealth, for directing your orders to execution venues. We mitigate this conflict of interest by regularly reviewing the execution quality of your orders.ā see this Cash App Investing Customer Relationship Summary ā¦
Then thereās a bigger picture - Trade Republic is a real competition, so no wonder the twitter tweets by the Ceoā¦
Freetrade vs Trade Republic: both will win in this game, because the Robinhood effect - relax, unless the founders are being slow and noone wants to work for these stonk companies
My review in the App Store which is self explanatory.
Quick translation
account top up from the 19th century (no quick deposit option, no Apple/Google Pay)
no fractionals
limited stock universe (no recent IPOs. Guess they are limited by L&S)
no French tax wrapper (PEA)
To add to the review:
The FX fee is hidden and not transparent.
The UI is nice and the feel of the app is fluid. Have to give them that. Also with 1ā¬ per transaction beats any bank in France. Though with all the PFOF discussion unclear how much you are really paying.
Not everyone is fan of reading the T&C as @zaccharles or @Eden. An average customer does not go into this level of detail I guess.
Also if I am not mistaken the team has mentioned that they are not using Drivewelath the same way most other investing apps do as they have internalized some of its features. Donāt take my word on this.
Im backing many horses in this stonk game --i love this game --but moving fast is important in fintech and TR look like they got the money muscle + the Eu advantage (I dont even care about Gbp stocks). You raise Series A/B and use it to hire the best people who choose to work for you. These ppl read Glassdoor and look at the churn rate and your infra (no I would nevr work at Revolut but I backed it and several other toxic companies) and if they choose you they work on improvin the product, get the stonk options and move to the nxt startups. Accel and Peter Thiel dont back slow horses so to me its a big deal they chose TR (i have no shares in TR unfortunately)
Neither does Draper back the slow horses. Toxic may be , but not slow.
The more competition the better for us customers. Most customers chose the best product and donāt really care about the backers.
This year is important for everyone to play their hand right.
We had a great chance to listen to Mr Cook from Draper earlier last year during an AMA session. The insight that stuck with me was about winners having a 2 year advance compared to the competition product-wise.
Many are holding their breath for the next AMA this Wednesdayā¦ Donāt forget to tune in)
if I was a startup in this space iād Just build the platform in Europe faster than the next guy and give the customer service people ask for , The regulators will tell if somethin is allowedā¦ Our USd trades should be done on IEX if we want no conflicts of interest but that option is gone after the Drivewealth partnershipp
We like the idea behind IEX and Iāve personally been over to see them in New York. Weāve used their pricing data in our app from the start. But what we and our users have found is that the data quality can be quite poor for most stocks in our universe and thatās simply because there isnāt enough volume on IEX (weāre working on adding better data in the app). This lack of volume also extends to execution quality.
DriveWealth connects to multiple venues, including the NYSE where they literally sit on the trading floor, when seeking best execution. DriveWealth and Apex Clearing between them power most of the retail trading apps in the US and there are different execution models that can be used. To be clear, we do not accept PFOF in the US or anywhere else. We also independently monitor for best execution and would direct our orders differently if we felt the best price wasnāt being achieved for our customers.
we think itās a better, more transparent, more aligned way to make money
As an Australian, coming from a country where tipping is non-existant (perhaps even despised), Iām probably biased. However, tipping may be more transparent and more aligned than PFOF, but itās neither compared to just charging for your service where necessary.
Itās not transparent. What happens if no one tips? Does the business go under? Iām now pressured into tipping. How much should I tip? How much do they need to be sustainable? Is everyone tipping enough? Are tips not actually required and just pure profit?
Itās not aligned. If I donāt tip at all, my order gets executed. If I tip the maximum 5%, my order gets executed. What exactly do I get out of tipping? How is my incentive to tip aligned with Publicās incentive to try and get more of a tip out of me? Is it aligned because I know Public need my tips to stay in business and I want to support that? If so, back to the transparancy problem. If not, when do I get a turn on the yacht?
Iām coming from a somewhat similar background. In Portugal the vast majority of people doesnāt tip for we tend to consider that the employer must pay the wages of the employee. The client pays for the service and/or goods provided and the wages must be paid with part of that revenue. There are occasional situations where people voluntarily tip. Circumstances like a group of sayā¦ 13 people go out for a meal. The total to pay is sayā¦ Ā£209.32. Each one puts Ā£20 and the waiter keeps the change. More often than not, at least in my experience but donāt take it for granted cuz it may not happen, the waiter will come back with a bottle and everybody can have a shot if they want to.
Public.com is an american company. The tipping culture there is different isnāt it? I skipped the american studies class but I wouldnāt be surprised if this could be a case where people feel it right.
Forgetting that circumstance, I reckon that in this context tipping ought to be seen in a somewhat similar light as tips via Patreon to content creators. I know itās not the same thing exactly, but with loose enough paragon, thatās the way I can see it work. An optional voluntary way to give financial support to, in this case, a company that gets you a sit at the table. A table where Ā£10 per trade is not uncommon and serves as barrier for entry for many.
These are all valid and reasonable points. But if disclosed upfront why not? I donāt see a tip as a way of paying for a service. The way I see it, a tip is a gift and I expect nothing in return for it.
Tipping is definitely common in the USA, especially where some employees rely on tips. Outside of the USA, it ranges from common (Canada), a nice thing to do (Portugal?), weird (Australia), to perhaps offensive (Japan).
I think what stands out to me is that this is tipping a business, not the employees. There are heaps of stories in the news of companies keeping tips intended for employees. These generally cause outrage because people either intend to compensate for a low salary, or because an individual or group did an exceptional job.
I just imagine tipping Starbucks because a barista made a nice cup of coffee and it seems weird. Does Starbucks need it to operate and pay their staff? Is it going to go toward roasting R&D to provide me with a better coffee in the future?
Who really wants to trust their money to a broker that relies on tips? If they donāt rely on tips, why would they need tips?
As someone else said, it all seems like a marketing ploy to me. Capitalising on PFOF being in the news. They even say in their FAQ on tipping:
Building off the events of last week and the call for more transparency in our industry, Public.com is ending its participation in Payment for Order Flow and introducing an optional tipping feature.
I just read this as āwe thought weād get away with PFOF, but now itās in the news, so weāre changing our business model before weāre in the headlinesā. If they truly believed PFOF was wrong, they wouldnāt have done it in the first place (i.e. Freetrade).
, but not slow.
I saw the glassdoor reviews of both Revlut and this pink stonk trading company it aint pretty
