Robinhood's 'free trading' model works because Citadel Securities pays Robinhood hundreds of millions annually for the right to execute retail orders -- a practice called Payment for Order Flow (PFOF). Citadel handles over 40% of all U.S. retail stock orders. The arrangement means Citadel sees retail order flow before executing it, enabling systematic advantages. During GameStop, this relationship came under scrutiny when Robinhood restricted buying while Citadel had just invested in short-seller Melvin Capital.
Robinhood sells your stock orders to Citadel Securities, which profits by trading against retail investors
“You are not Robinhood's customer -- you are the product. Your stock orders are being sold to high-frequency traders who profit by trading against you.”
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