Robinhood appears to be embroiled in yet another potential controversy, after it failed to disclose certain OTC trades it executed for customers in 2020 to a public data feed.
According to a source familiar with the matter, as well as regulatory data analyzed by Reuters, Robinhood did not report OTC trades in fractional shares that were conducted on behalf of customers last year. The “slip up” could potentially lead to yet another fine for the company. Fractional share trading, such as what is offered by Robinhood competitors the Cash App and Schwab, have allowed those retail traders looking to invest small amounts, to purchase fractions of a share— such as Amazon or Tesla.
As Reuters points out, brokerages must report all trades to trade execution facilities— including trades that are less than a full share, in order to ensure full transparency. This is done so market participants are able to make decisions not only based on prices, but also who is trading what and when. In the past, other brokerages such as Deutsche Bank and Merrill Lynch have been fined for not abiding by those particular rules.
Although Reuters was unable to determine the exact number of trades that Robinhood did not report, regulatory filings reveal that at the end of 2020, Robinhood’s retail investors held a total of $802.5 million in shares that were purchased through the brokerage’s fractional share program.
Information for this briefing was found via Reuters. Thee author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.