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Hedge
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=== Payment For Order Flow === ==== How does payment for order flow (PFOF) work? ==== [[File:B602fbe220078826478935ca2c6546edaf795ce.png]] # A customer places an order on Hedge, who routes it through its brokerage for execution. # Hedge then sends the order through its brokerage to a high-frequency trader (HFT) who will look for a better price off-exchange. If the HFT sees another order that is better than the on-exchange price, they'll purchase it and sell the asset back to the user for the difference. # The wholesaler is required by law to find the best execution but pays Hedge regardless of whether they’re able to find one off-exchange. This allows Hedge to rebate a portion of the PFOF revenue back to their users, either way, thus improving their overall order execution. ==== Will payment-for-order-flow be a significant part of your monetization plans at scale? ==== No. At scale, this will be a fraction of our revenue. See “How do Hedge’s expansion plans and unique monetization strategies differentiate the company from other platforms?” for more information. ==== Why include PFOF at all? ==== PFOF is generally beneficial for the consumer (better execution – see above) and we’re not going to turn the spigot off while it exists. Overall, it’s highly unlikely that PFOF is going away any time soon – the CEO of NASDAQ is on record saying that commission-free trading likely wouldn’t exist without it. It makes little sense to cut off a key source of early revenue that can support our growth over time. So as long as it exists, we’ll continue to collect PFOF. ==== That being said, we’re not basing our business off of PFOF, period. ==== At best, by encouraging increased trading volume and exploiting your customers, you stand to make roughly $3-5B per year max. During Q1 & Q2 of 2021, periods that experienced some of the highest volume ever recorded in the retail markets, Robinhood was on pace to make ~$2.5B from transaction-related revenue. We’re not looking to max out at $3B in ARR at scale – '''we’re looking to see how we can build Hedge’s product up to reach $10B, $50B, and maybe even $100B in ARR'''. We’re starting by competing with the Robinhood’s & WeBull’s of the space and building to take on Charles Schwab, Fidelity, and other incumbents of institutional finance – most of which haven’t been properly challenged in over a century.
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