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Key Words: Robinhood’s Tenev says SEC regulatory push is about ‘control,’ not investor protection

Robinhood Markets Inc. CEO Vlad Tenev took aim at U.S. regulators’ plans for stricter rules governing smartphone trading apps and the payment-for-order-flow business model that has turned his company into a $38 billion titan in the brokerage industry in an op-ed in the Wall Street Journal Tuesday.

“The democratization of markets threatens the existing order,” Tenev wrote. “New investors are trying to build stable financial futures and reverse the inequities that plague our society. One wonders whether the push to ban payment for order flow and overregulate modern design is about investor protection or really about control.”

Last month, Securities and Exchange Commission Chairman Gary Gensler put out a request for public input on the digital engagement practices of online broker-dealers and investment advisors, like Robinhood amid concern that “gamification” techniques could encourage over trading or spill over into providing investment advice.

Gensler has also said his agency is considering new regulations on payment for order flow, a practice whereby market makers pay brokers like Robinhood
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for the privilege of executing their customer trades. In August, Gensler told Barron’s that an outright ban of the practice was “on the table” because it creates “an inherent conflict of interest” that could cause brokers to deliver worse trade execution to their customers.

Former Acting Chairman of the SEC Michael Piwowar told MarketWatch earlier this month that an outright ban is unlikely, though regulators could end up requiring more detailed disclosure related to the practice.

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