(Reuters) – Shares in Robinhood Markets Inc., a popular meme stock gateway, plunged nearly 7% on Monday on news that PayPal Holdings Inc. could launch an online broker and a report saying regulators were watching on a possible Prohibition of a practice that accounts for the bulk of the company's revenue. after Gary Gensler, chairman of the US Securities and Exchange Commission, told Barron in an interview published on Monday that payment for order flow has "an inherent conflict of interest."
Retail brokers such as Robinhood send their clients' orders to wholesale brokers rather than exchanges in the controversial practice known by the abbreviation PFOF.
Mr. Gensler said that in addition to making a small spread on each trade, wholesalers or market participants also get data, the first look at a trade and the ability to match buyers and sellers from the order flow they pay retail brokers.
"These may not be the most efficient markets for the 2020s," Gensler told Barron in the interview.
Mr. Gensler did not say whether the SEC had found cases where conflicts of interest had harmed investors.
fears that it may stimulate brokers to send client orders to trading platforms that maximize their own profits instead of giving clients the best performance for their trades.
Shares in Robinhood closed 6.9% to $ 43.64. end of July and has increased by about 25% since, according to Refinitiv data.
Robinhood's simple interface has made it popular with investors trading from home during the COVID-1
In an email to Reuters, a Robinhood spokesman pointed out to its chief financial officer earlier remarks that the company would defend its customers and ensure that it does not sets up barriers that keep people out.