Programming note: Money Stuff will be off tomorrow, back on Monday.
The basic idea is that if a Robinhood customer is buying stock, it is usually good to sell it to them. In general, if you sell stocks, you will worry that the people buying from you know something you don’t. They might know that, like, the company is about to announce a merger or whatever, but realistically the main thing they might know is that they themselves plan to buy more stock: If you sell them 100 shares of a stock at $10, and then they buy 10,000 more shares, the price will go up and you will wish you had not sold to them at $10. If BlackRock Inc. is buying stock and you are selling it to them, that is a real risk that you face; it is called “adverse selection.” But if a Robinhood customer buys 100 shares of stock from you, the chances that she’s buying 10,000 more over the next two minutes are pretty slim. That is mostly not how Robinhood Markets Inc. customers behave. So selling stock to Robinhood customers who want to buy — or buying it from Robinhood customers who want to sell — is a better and safer business than trading stock with BlackRock. We talk about this a lot around here.
