"The predictive-data analytics also raises a number of important challenges: conflicts of interest, bias, and systemic risk," Gary Gensler said.
The Citadel founder also praised Robinhood and other brokers for "democratizing finance in America."
JPMorgan gave Robinhood a $35 price target, a 22% decline from Tuesday's closing price.
The firm, founded in 2015, has quickly grown to be one of the most prominent fintech players. At present, Revolut has over 16 million customers.
"The system has been so good from an execution point of view for the end investor," Wood said about Robinhood's payment-for-order flow.
Robinhood derived about 80% of its revenue from payment for order flow transactions in the second quarter.
Robinhood listed a potential ban of the payment for order flow practice as a risk to its business in the firm's S-1 IPO filing.
Jump already executes crypto orders for Robinhood, but the move into stocks thrusts the trader into the heart of the meme-stock phenomenon.
Many retail investors see payment for order flow as just another example of companies selling consumer data.
"I am struck by Robinhood's decision to reserve shares for their customers. This may be a strategy to try to build brand loyalty," a finance professor told Insider.
Chair Gary Gensler said he asked the regulator's staff to submit recommendations on a range of market rules, including high broker fees.
"If you think of zero commissions, on paper it sounds great-trading was expensive and now it's free. That's obviously complete nonsense," Gerko said.
The trading app's payment for order flow generated $331 million in revenue in the first quarter, reported the Wall Street Journal.
Duke Law Professor Gina-Gail S. Fletcher told Congress that payment for order flow models "undermine the relationship" between brokers and clients.
The nominee to be the next SEC head says he wants the agency to evaluate the practice, which came into focus during January's GameStop drama.
Payment for order flow (PFOF) is the compensation brokerages earn by having third-party firms execute client orders. Payment for order flow can impact an investor’s final per-share cost, especially if they trade actively. Though PFOF can affect costs, it doesn’t jeopardize your transactions or account security. Visit Insider’s Investing Reference […]