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Robinhood, the popular commission-free trading app that launched as a change of pace startup company in the wake of the 2008 financial crisis, has an antithetical underbelly that was just brought to light.

According to a report by Bloomberg, Robinhood makes more than 40% of its revenue by selling its user order data to high-frequency trading firms, a practice commonly referred to as payment for order flow.

Bloomberg notes that it’s questioning of Robinhood around the practice had prompted the company to amend its terms of service and publish a letter outlining their relationship with major market makers.

“When you buy or sell stocks on Robinhood, like many other brokerages, we send your order to market makers like Two Sigma, Citadel and Virtu, instead of exchanges like NYSE,” said Robinhood co-founder, Vlad Tenev. “Market makers don’t front-run your orders — they’re actually required by Regulation NMS to execute your order at the best price among all of the exchanges, and unlike exchanges, they don’t charge fees.”

Turning the table, Tenev emphasized that the selling of order flows ultimately allowed Robinhood to cover the costs of operating its business, enabling them to offer commission-free trading.

While the practice of selling order book data to third-party market makers is not illegal, it has long been criticized by regulators and consumer advocates, who claim that the activity is not in the best interest of customers. These practices promote conflicts of interest and could ultimately place users in compromising positions.

The Bloomberg report indicates that Robinhood has already begun to feel some ramifications from their close connection with high-frequency traders, with a few anonymous venture capitalists asserting that it undermines its image and hinders the company’s expansion plans. Perhaps most notably, one VC even said it was the reason he didn’t invest.

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Robinhood most recently raised a $363 million Series D financing round at a $5.6 billion valuation back in May.

More: Robinhood Gets Almost Half Its Revenue in Controversial Bargain With High-Speed Traders
Related: A Letter From Robinhood Co-Founder & Co-CEO Vlad Tenev
Photo: Robin Hood / Flickr

Disclaimer: This article’s author has cryptocurrency holdings that can be tracked here. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.

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