Robinhood Financial agreed to pay $1.25 million penalty to a brokerage industry regulator for failing to ensure that its customers received best prices for securities orders.
Robinhood, which lets its customers trade stocks for free, routed all trades to four securities firms that paid it for order flow, the Financial Industry Regulatory Authority said in a Thursday statement. In doing so, Robinhood didn’t consider factors such as “price improvement” that it could have obtained for clients by sending trades elsewhere, the regulator said.
(Read More: Robinhood Is Said to Get 40% of Revenue From Firms Like Citadel)
Retail brokers like Robinhood often make money from selling its customers’ orders to high-frequency trading firms, or market makers.