> You can't get filled at a worse price than the lit exchanges are showing.
Can you be more specific? I believe you are talking about a market order. Unless you have full access to all order books you can't really know whether you were filled at the best price of all lit exchanges. AFAIK brokers have a duty for best execution - still I'm pretty sure that you get poorer execution on Robinhood than on other brokers: They route your orders to just 4 firms. Though the "loss" might be insignificant for the average retail investor trading very liquid instruments.
> Can you be more specific? I believe you are talking about a market order.
No, I am not talking about both limit orders and market orders. I am talking about nearly all orders that a retail trader would use. As an institutional trader, you would sometimes use orders that will be filled at worse prices than the lit market. Retail traders do not typically have a need for those orders.
> Unless you have full access to all order books you can't really know whether you were filled at the best price of all lit exchanges.
This is true, but the person filling your order does have a responsibility to ensure that your order is filled at the lit exchange price or better. If you find contrary evidence,the regulators would possibly be willing to pay you a lot of money for it.
> Though the "loss" might be insignificant for the average retail investor trading very liquid instruments.
Compared to trading on a lit exchange, you should not be experiencing a loss and you are possibly experiencing a small gain.
You might be experiencing a small loss compared to trading through a broker that sends your orders to HFT firms, but does not accept payment for order flow. I would be interested in seeing data on that, but I would very surprised if that were true.
According to your Schwab link, if there is no fill improvement on Robinhood then you are better off using Robinhood for orders under 500 shares because commissions are $4.95 and the fill improvement is less than that. Is that your interpretation as well? Do you have a link showing that Robinhood customers do not get any fill improvement?
I don't think the KCG link is relevant as they do not have retail customers. This means that KCG's customers are going to be more informed than Schwab's customers so you can't afford to give them as much fill improvement.
> This is true, but the person filling your order does have a responsibility to ensure that your order is filled at the lit exchange price or better. If you find contrary evidence,the regulators would possibly be willing to pay you a lot of money for it.
I'm still struggling with your definition of a lit exchange price. Are you referring to the NBBO? The price you get largely depends on the order size, so the NBBO only applies up to a certain order size. Also the NBBO might not even be up-to-date.
Regarding regulation: "In deciding how to execute orders, your broker has a duty to seek the best execution that is reasonably available for its customers' orders" - usually this means you should have a better or same price as the NBBO - up to a certain order size. If you are happy with the NBBO then you are right and I wouldn't worry too much - however if I recall correctly the NBBO is usually pretty wide and has plenty of other caveats (eg: http://www.nanex.net/Research/IsNBBOIgnored.html).
> According to your Schwab link, if there is no fill improvement on Robinhood then you are better off using Robinhood for orders under 500 shares because commissions are $4.95 and the fill improvement is less than that. Is that your interpretation as well?
Do you mean price improvement? I seen no mentioning of fill improvement on the Schwab link. But yep, seems about right.
> Do you have a link showing that Robinhood customers do not get any fill improvement?
> I don't think the KCG link is relevant as they do not have retail customers.
Robinhood lists KCG, Citadel and Two Sigmas as their market centers - so that's the best information I could find regarding price improvement for Robinhood customers.
> If you are happy with the NBBO then you are right and I wouldn't worry too much - however if I recall correctly the NBBO is usually pretty wide
You still haven't shown evidence that price improvement is worse on Robinhood than on Schwab by an amount that exceeds Schwab's commissions. We both agree that for under 500 shares ($15,000 on a $30 stock) Robinhood is better even if there is 0 price improvement.
I've already explained in my previous response why you can't compare the KCG statistics to the Schwab statistics. I will repeat it again and rephrase it in case I was unclear. KCG does not have retail customers so their price improvement statistics are not comparable to Schwab's price improvement statistics. Retail customers get more price improvement because their flow is less toxic than institutional flow.
> Robinhood lists KCG, Citadel and Two Sigmas as their market centers.
I'm not really sure what this is referring to. Schwab routes to UBS, Citadel, KCG, G1X, and Two Sigma.
I have no affiliation with Robinhood and think that they're bad for the markets, but what you listed is FUD.