The democratization of finance has been a dominant theme in recent years – companies are trying to level the playing field and provide amateur investors with the same opportunities as hedge funds and institutional investors.
There have been some successes along the way. Buying stocks is much easier now than it was a few years ago. The Internet has helped demystify the stock markets … so anyone can practice technical analysis and access the very latest information. The costs associated with the offering of shares also declined.
One of the companies filming this trip was Robinhood, named after the great English folklore that was stolen from the rich for distribution to the poor. The platform was built on the belief that everyone should have access to financial markets, making investments “friendly, welcoming and understandable for both novices and experts.”
It was a tempting message to encourage people to subscribe to their audience. But that idea was hit hard by the brief closure of GameStop, led by the Reddit / Wallstreetbets forum. A group of private investors brought hedge funds short and raised the share price from $ 20 to $ 483 in a matter of weeks.
Robinhood quickly ran out of money to cover these deals, hit the brakes and announced that she had stopped buying GME shares altogether. Restrictions followed later. This caused setback among Redditors and threatened boycotts as the company was accused of joining hedge funds.
Dozens of class measures followed, with some even claiming that Robinhood “stole from the poor to give to the rich.” Inevitably, some cryptocurrency enthusiasts have pointed out how decentralized finance and digital assets are helping to solve this problem – because they already have the power to democratize the trading world.
Wrong business model?
Robinhood is now starting to shed dust – the company’s CEO apologized to clients at a Congressional hearing, calling the situation “unacceptable.”
But this is not the first time that a 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 fulfill its obligation to find the best conditions reasonably available to fulfill customer orders,” with the company paying $ 65 million in fees.
The Securities and Exchange Commission said that “misleading data and flaws were presented in the way the company communicates with its customers.” This refers to the fact that Robinhood will send sales orders to companies to fulfill and receive in return for payment. While one of the main arguments in favor of the trading platform for clients was that it was “commission free,” the regulator said the “unusually high” utilization by other trading firms meant that orders were often filled at low prices.
Even after taking into account the savings that users gained by not paying a commission, the SEC estimated that customers ultimately lost $ 34.1 million. As Joseph Sanson, an SEC spokesman, noted, “Robinhood was unable to achieve the best reasonably available terms in fulfilling customer orders, resulting in tens of millions of dollars in losses for customers.”
At the time, the company told Cointelegraph that “the settlement is associated with historical practices that do not reflect robinism today.”
Are cryptocurrency platforms possible?
Quantfury says it is committed to addressing the challenges of centralized trading platforms by offering commission-free trading and investing, giving people free access to real-time prices of the world’s cryptocurrencies.
The platform offers stocks, cryptocurrencies, ETFs and futures contracts – and adds that it is driven by a desire to be transparent and honest. Quantfury’s trading data is digitized and published anonymously using a smart contract, which means volumes can be easily verified on the platform.
According to the brokerage house, it also offers a wide range of features that allow users to buy, sell, and benefit from guaranteed execution and replenishment of cryptocurrency account balances of their choice.
Leveling the playing field is an issue that Quantfury founder Lev Mazur is interested in. In an article explaining the truth about retail, he wrote: “Every day, ordinary people around the world lose billions of dollars due to dangerous trading platforms, the only purpose of which is to burn their users by manipulating real estate prices beyond the visible ones. and hidden. Expenses. ”
The company says that over the past two years, it has made sure that users who call themselves QuantForians are not at a disadvantage – until they can take their fate into their own hands.