AOC wants Robinhood to give customers the profits from payment for order flow. Here’s what she’s talking about

AOC wants Robinhood to give customers the profits from payment for order flow. Here’s what she’s talking about

If Rep. Alexandria Ocasio-Cortez, D-N.Y., had her way, Robinhood customers would be getting more than just an apology from the trading app during Thursday's congressional hearing on the recent GameStop trading restrictions. During a hearing called by the House Financial Services Committee, Ocasio-Cortez pressed Robinhood CEO Vlad“¯Tenev to return revenue that the company generates from a system called payment for order flow. "Earlier one of my colleagues, Rep. [Michael] San Nicolas [of Guam], said Robinhood owes its customers a lot more than an apology, and I happen to agree with him," Ocasio-Cortez said. "I believe the decisions made by you and your company have harmed your customers."

What is payment for order flow?

Payment for order flow is a practice that many brokerages use where they receive a payment from a third party, generally a market maker, for directing a trading order to them. Market makers are typically large banks or financial institutions that essentially act as wholesalers to buy and trade securities, sometimes from their own inventory. Big names include firms such as Citadel Securities, Two Sigma Investments and Virtu.Let's say you want to buy a share of Apple stock,which is currently selling for about $130 per share. In many cases, the brokerage doesn't immediately buy it