Robinhood Markets Inc (NASDAQ: HOOD) investors were relieved on Thursday after a report said the U.S. Securities and Exchange Commission may not execute the much-feared ban on payment for order flow.
Capital Alpha analyst reacts to the news
That’s a massive positive for brokerages like Robinhood that generated the most of their revenue from payment for order flow. Reacting to the news, Ian Katz – Analyst at Capital Alpha said:
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That’ll be a relief to brokerages particularly Robinhood but not a surprise. As we’ve noted since late last year, the much-feared ban probably won’t materialise at all, and if it did, it would be after several other market structure steps are taken first.
Last month, Robinhood cited macro headwinds and the related hit to cryptocurrencies as it announced plans of trimming its headcount by 23%. (link)
Its financial results for the second quarter, however, still came in better than expected. “Hood” is currently down about 50% for the year.
Should you buy the Robinhood stock?
On the flip side, the Bloomberg report did say the regulator will likely announce “other” changes to make payment for order flow less profitable. Still, Jim Cramer on CNBC’s “Squawk on the Street” dubbed it a positive catalyst for Robinhood.
This is a stunning victory for Robinhood because this is how they make their money. They’re not making a lot of money on custody. So, the stock goes higher; higher than this certainly.
So, it may be a good idea buying Robinhood stock here.
Both SEC and the financial technology company are yet to make an official comment on the stock market news.
Robinhood lost 1.9 million monthly active users in its latest reported quarter and was fined $30 million last month by the New York State Department of Financial Services.
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