Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 2023 erstellt
Beschreibung:
Market order collaring, the automatic conversion of market orders to limit orders with 5% spread over prior prices, has been utilized at Robinhood to protect retail investors from trading at unfavorable prices. In this paper, we provide several empirical evidence that this policy harms retail traders in the form of higher trading costs. Using two quasi-experiments involving Robinhood's trading hours and the discontinuity around 5\% spread, we find that Robinhood customers have higher likelihood of paying extreme spreads over close prices. Further, the policy is associated with extreme price movements in stocks. We estimate the economic loss of the retail traders due to market order collaring is on the order of million dollars per day