The commission-free brokerage company Public vigorously launched a viral advertising campaign on Tuesday, and it was nothing more than the power folk master Michael Bolton (Michael Bolton). In the video, Bolton and Volkswagen targeted their rival Robin Hood.
Bolton rose to the top of the Billboard rankings in the late 1980s. Since then, he has been fascinated by his image comedy and appeared regularly in commercials. He sang and said that he would “break up” with your brokerage platform. This is obviously a hint to Robinhood. . Amidst the turmoil of GameStop, it has recently been scrutinized by users, regulators and Congress.
“Hey, the guy on Twitter, it̵
In this song, Bolton sang about viewing on Reddit and “Order Flow”, so new people must be found.
“Tell me who you sell my deal to, oh, oh,” Bolton croons.
This is the key to opposing the Robinhood movement: market makers like Citadel Securities pay Robinhood the right (opportunity) to execute transactions on the platform, usually at a higher price than the price obtained by the exchange. This practice is called “order flow payment”.
They pay because when these market makers execute orders, they will get a lot of information about retail investor transactions, which may give high-frequency traders an advantage. According to some studies, the market is negatively affected by this.
Bolton said in the ad that public is different from your old broker: “They won’t sell your transactions to third parties.” What the public wants to know most is that it wants to be a combination of brokerage platforms and social networks in these platforms In, the portfolio is shared and checked by other users.
In the latest announcement on February 1, the company said it would stop participating in order payments.
Public investment in this viral marketing campaign shows that it sheds blood in the water and attracts as many Robin Hood customers as possible by spreading the message that Robin Hood is a bad broker.
Chief Executive Vlad Tenev testified before Congress on February 18 that Robin Hood currently has 13 million accounts. The public had 1 million accounts launched a year and a half ago. A spokesperson told Yahoo Finance that on January 28, Robinhood banned customers from buying GameStop and other stocks. The number of signatories for the company increased 20 times that day, and their average month-on-month growth rate was about 30%.
(Although the public refused to share their precise growth, the February post stated that the size of the “community” had doubled in previous weeks.)
Order flow payment is what many brokerage companies do and get considerable income from it, which is one of the reasons why zero-commission trading becomes possible.
Unlike Robinhood, Public does not provide margin (it recommends WeBull if needed), which means that the two main tools used by zero-commission brokers-fees from market makers and margin loans-are no longer under discussion. (Margin loans allow the investor to borrow from the value of the securities he or she already owns.)
Instead, the public makes money from cash accounts and from interest on loaning securities owned by its users to short sellers.
Lending securities to short sellers is a common practice, such as paying for an order flow, which allows one of these entities to borrow stocks and sell short. This practice is built into some trading platforms, so many users may not realize that their stock has been lent. (Some brokers do this, some don’t, and some provide customers with part of the revenue.)
Considering the public’s attitude towards short sellers after the GameStop incident, this may not make the payment method of order flow a “scandal” (which was an important part of the Congressional hearing last week). (During the GameStop tightening period, some investors asked brokers not to lend their shares to short sellers.)
A spokesperson said, however, the public will respect the request not to lend its shares. The debate about new ways of making money while still offering commission-free transactions has changed a lot from the influx of new investors to questioning the status quo. If all of these are not feasible, Volkswagen said it might end up with subscription fees for premium products.
Ethan Wolf Man Is a writer for Yahoo Finance, mainly researching consumer issues, personal finance, retail, airlines, etc.Follow him on twitter @ewolffmann.