Comments URL: https://news.ycombinator.com/item?id=47443570

Points: 3

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The consolidated bid and the ask across all exchanges make up what's called the NBBO and every one (market makers, exchanges, etc) are required to give you a price equal to or better than the NBBO. So if the bid for SHOP is say $50.00, the ask is $50.10, and you are selling SHOP, its illegal for anyone to give you a price < $50.

Market makers make money by buying low and selling high (and vice versa). They typically look for small movements not large ones. So if a market maker bought SHOP at $50, they would try to sell it at $50.10. This is what everyone means when they say a market maker makes money off the spread.

This strategy works really well when you have large random order flow, which is why market makers want to pay brokerages for order flow. They incentivize brokerages, even ones that charge commission) by giving pfof (payment for order flow) and price improvement on top of the NBBO. This price improvement is passed on directly to the customer.

IIRC, brokerages have a best execution obligation. So they are required to try and execute orders in a way that gets customers the best prices. I don't know about other brokerages but at Robinhood, pfof wouldn't go into our order routing decision at all. We would send orders to the market maker using a model which only considered the historical price improvement they gave our customers.

Because Robinhood order flow is so lucrative for marker makers in aggregate, they were willing to give us really good price improvement. So the execution for options and equity orders at Robinhood be better than other brokerages (even ones you pay commission for)

Regular money can’t be transferred digitally. If you want to send money to someone, both your bank and their bank need to speak the same protocol. This isn’t an issue usually but try sending a large transfer (>100k) or sending money internationally.

Stablecoins have the protocol built into it. Just by using a stablecoin, you are able to receive and send the coins digitally to anyone else who uses them.

There are two prices, the bid price (how much someone is willing to pay) and an ask price (how much someone is willing to sell). When you submit a market order, you usually get a price close to the bid (if you’re selling) or the ask (if you’re buying).

The 20$ difference you describe is the spread - not a fee taken by the brokerage, market maker, exchange. Whoever is executing your trade isn’t pocketing the 20$.

Comments URL: https://news.ycombinator.com/item?id=31294592

Points: 1

# Comments: 0

Plus, nothing wakes you up in morning like potentially cutting yourself