Democratizing finance has been a dominant theme in recent years – with companies vying to create a level playing field and provide amateur investors with the same opportunities that hedge funds and institutional investors enjoy.
There have been some successes along the way. Buying supplies is a lot easier now than it was a few years ago. The Internet has helped demystify the stock markets… allowing anyone to train themselves in technical analysis and access the latest information. The costs associated with obtaining equity exposure have also decreased.
One of the companies that kick-started this journey was Robinhood – named after the legendary figure in English folklore who stole from the rich to give to the poor. The platform is built on the belief that everyone should have access to financial markets, making investing ‘friendly, approachable and understandable for newbies and experts alike.
It was an enticing message – and one that encouraged people to sign up en masse. But this view took a huge blow as a result of the GameStop short squeeze, spearheaded by the Reddit forum r / Wallstreetbets. A group of private investors entered into short-selling hedge funds, pushing the stock price from $ 20 to $ 483 within weeks.
Soon running out of money to cover these transactions, Robinhood stepped on the brakes and announced that it was stopping purchases of GME stock altogether. Limitations followed later. This caused a backlash among Redditors and threatened a boycott, accusing the company of collapsing into hedge funds.
Dozens of class-action lawsuits have followed, some even claiming Robinhood “ stole from the poor to give to the rich. ” And inevitably, some crypto aficionados have pointed out how decentralized finance and digital assets are helping solve this – because they have the potential to democratize the trading world.
A flawed business model?
Robinhood is now dusting himself off – the company’s CEO apologizes to customers at a hearing at the conference, describing the situation as “unacceptable.”
But this isn’t the first time the trading platform has ended up on the wrong side of clients. In December 2020, the US Securities and Exchange Commission accused Robinhood of “failing to comply with its duty to seek the best reasonably available terms to fulfill customer orders,” with the company paying $ 65 million to cover the costs.
The SEC alleged that “misleading statements and omissions” had been made in the way the company communicated with its customers. This involved the fact that Robinhood would send customer orders to firms for execution and receive payment in return. While one of the trading platform’s big selling points to clients was that it is “commission-free,” the regulator said the “unusually high” usage of other trading firms meant that orders were often executed at lower prices.
Even after taking into account the savings users made by not paying commission, the SEC estimated that its customers would end up missing out on $ 34.1 million. As SEC official Joseph Sansone noted, “Robinhood failed to obtain the best reasonably available terms when fulfilling customer orders, causing customers to lose tens of millions of dollars.”
At the time, the company told Cointelegraph that “the settlement pertains to historical practices that Robinhood does not reflect today.”
Are crypto-powered platforms an alternative?
Quantfury says it aims to solve the problems with centralized trading platforms by offering commission-free trading and investment – giving people access to real-time spot prices of global crypto exchanges at no cost.
The platform offers stocks, cryptocurrencies, exchange-traded funds and futures – adding that it is driven by a determination to be transparent and fair. Quantfury’s trading data is digitized and published anonymously using a smart contract, meaning the authenticity of volumes on its platform can be easily verified.
According to the brokerage, it also offers a wider range of features – allowing users to go long and short, take advantage of guaranteed execution and fund their account balances in crypto of their choice.
Leveling the playing field is an issue that Quantfury’s founder Lev Mazur is passionate about. In an article outlining the truth behind the retail industry, he wrote, “Billions of dollars are lost daily by simple people worldwide on dangerous trading platforms whose sole purpose is to churn and burn their users with manipulated asset prices, as well as both visible. and hidden costs. “
Over the past two years, the company says it has made sure that its users, who call themselves Quantfurians, are not disadvantaged – allowing them to control their own destiny.
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