Investing.com – Stocks of trading app Robinhood Markets (NASDAQ:HOOD) looked like extending their losses Tuesday after remarks by Securities and Exchange Commission Chairman Gary Gensler triggered a selling in the counter in the previous session.
Robinhood closed nearly 7% lower Monday and traded 3.2% lower in today’s premarket.
Gensler told Barron’s that a full ban of payment for order flow is “on the table.”
Payment for order flow is a practice where brokers send trade orders from customers to market makers who execute those trades and collect a small commission or fee from the transactions.
The SEC staff is reviewing the practice and could come out with proposals in the coming months, the Barron’s report said.
Gensler has been critical of the method in the past, on the grounds that it conflicts with brokers' fiduciary duty to find the best price for their clients. Others have cited the well-worn phrase that if the service is provided for free, then the customer is ultimately the product.
Robinhood relied on PFOF for more than 75% of its revenue in the first quarter.
Monday saw a double whammy for Robinhood stock, as a CNBC report said PayPal (NASDAQ:PYPL) is looking into launching a stock trading platform that would compete with it. The company recently hired brokerage industry veteran Rich Hagen and is considering to let users trade individual stocks, the report said.