Robinhood might have omitted certain trade executions from public feed

As per credible sources, American retail brokerage services provider Robinhood Financial LLC has failed to disclose certain types of stock trades it had executed last year to a public data feed.

Although Robinhood had introduced its fractional share service in December 2019, it only began disclosing trade executions since January this year. It is still unclear how many trade activities Robinhood has failed to report to the public feed.

Notably, these fractional shares are usually offered by several brokerages, which allow investors to acquire a slice of the share rather than the whole stake.

Brokerages are then required to disclose all their trade activities to TRFs (trade execution facilities) as per the guidelines issued by the U.S. Securities and Exchange Commission and FINRA (Financial Industry Regulatory Authority).

When stocks trade over-the-counter, investors usually rely on brokers to disclose the trades to the TRF. This information allows in determining the prices of each share. If not disclosed, it decreases the amount of data available to the market participants, which could result in an unlevel playing field.

It is also worth mentioning that Robinhood users held approximately USD 802.5 million in shares, which were predominately purchased through its fractional share services. Most of these purchases might have been conducted by wholesale brokers.

According to Robinhood, it only executes a small percentage of its fractional orders from its trade inventory. However, some experts claimed that although the omission is enough to impose serious fines on the company, it is not a major lapse considering the number of unreported trades could be a small fraction.

The reporting lapse emerged after Robinhood had filed for an IPO at USD 30 billion valuation. The company has executed over 1.86 million tier-one shares in mid-March, while around 3.51 million tier-two shares were executed in the first week of the same month.

Neither FINRA nor Robinhood were available to provide additional details of the development.

Source Credits –

https://www.reuters.com/article/us-robinhood-regulation-tradereporting-e/exclusive-robinhood-failed-to-disclose-certain-trade-executions-to-public-feed-idUSKBN2BV0FZ