Comment by ants_everywhere
6 months ago
> And there's no third party scamming them.
Sure there is. Retail investors are prey for more sophisticated investors. Getting people on WSB to make bad financial decisions is cheap and easy. I would be astonished if it isn't thoroughly astroturfed by hedge funds and other financial professionals.
I can think of one such example where the populace emphatically said retail investors were getting screwed, and AFAIK, conclusive proof was never found.
The claim was that Citadel was frontrunning Robinhood's retail investor order flow, which Citadel's market making arm paid for. The masses claimed that this was an extreme conflict of interest, and Citadel "must" be scalping the retail investors. However, the suspected reality is that Citadel was merely providing a market making service that (a) Robinhood couldn't do as well as a non-core activity and (b) for cheaper. Here's a Matt Levine overview [0] from 2021.
[0] https://www.bloomberg.com/news/newsletters/2021-08-31/what-h...