January 29, 2021

We Lose Money on Each Trade, But Make It Up In Volume

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I’m not super interested in the whole GameStop fiasco, but a paragraph in a New York Times piece caught my attention last night. A lot of the trades that have sent GameStop into the stratosphere were made via Robinhood, a trading app that charges no fees. So how do they make money?

Without fees, Robinhood makes money by passing its customer trades along to bigger brokerage firms, like Citadel, who pay Robinhood for the chance to fulfill its customer stock orders.

Wait. Robinhood can’t make money with $0 fees, but Citadel can apparently make money with essentially negative fees. I’m no high finance guy, but what am I missing here?

UPDATE: A reader answers my question:

There is value in the “flow” itself. Market makers (like Citadel or others) earn return by buying and selling particular stocks. If they have a ton of orders, buys and sells, at different prices, they can fill those orders in such a way as to earn a spread on each transaction (or really the totality of transactions as they are essentially wholesalers). This is how trading works. Commissions are just like a processing fee. That’s not how trading desks make money.

Huh. Somehow this still seems like a good way to lose a ton of money if things go pear shaped. But my money is all in low-load mutual funds, so what do I know?

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This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

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About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

payment methods

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