The S.E.C. head is considering banning a key way Robinhood makes money.

Mr. Gensler told Barron’s that the practice has “an inherent conflict of interest” because the firms that execute the trades can benefit from that information.

“They get the data, they get the first look, they get to match off buyers and sellers out of that order flow,” he said.

Over the past several months, Mr. Gensler has made a series of statements saying he was closely examining the practice and was open to a wide range of regulatory options. He ordered the agency to look into the matter shortly after he was confirmed; the review is still ongoing.

Robinhood pointed to comments its chief financial officer, Jason Warnick, made as the company prepared for its initial public offering this year. “We think payment for order flow is a better deal for our customers versus the old commission structure,” he said at the time. In a call with investors earlier this month to discuss quarterly earnings, Robinhood officials said that while they did not anticipate an outright ban of payment for order flow, their sources of revenue were diverse and could easily withstand such a move.

Citadel had no immediate comment. Virtu declined to comment.

Consumer advocates and others have criticized the practice, complaining that it can give the large trading operations an advantage.

Article source: https://www.nytimes.com/2021/08/30/business/sec-payment-for-order-flow-robinhood.html