Curriculum·R410 Copy Trading, Vaults, and Agentic Execution·about 42 min
The mechanics that erode the copy
By the end of this lesson you can
- →Name the five mechanical wedges between a leader's return and a follower's
- →Compute a full erosion stack and express it as a fraction of the leader's result
- →Explain why the wedge grows with the number of followers
- →State what your realized return would have been, which is what the lab asks for
Senior · enrolled learners
This lesson opens with The SEC best execution order, 17 December 2020, read as a wedge.
- What happened
- The SEC charged Robinhood Financial with failing to satisfy its duty to seek the best reasonably available terms when executing customer orders, and with misstatements about its receipt of payments for routing those orders. The order found that unusually high payments for order flow contributed to customers receiving inferior prices compared with other brokers, and computed the aggregate cost to customers at $34.1M after accounting for the commissions those customers had not paid. The firm agreed to a $65M penalty. The relevant point for this lesson is not the conduct but the measurement: the difference between a displayed price and a received price was computable, was invisible on any statement, and was large in aggregate while being trivial on any single order.
- The decision point
- A copied trade is the same measurement problem with more terms in it. The leader's price and your price differ because of when the signal arrived, how large your order was relative to theirs, which venue you were on and what you paid to be there. Each difference is small per trade and none of them appears anywhere in the leader's reported return, which is why the follower's realized result has to be computed rather than assumed.
- Recorded loss
- $34,100,000
What you will be able to answer
- →What are the five wedges?
- →What does the stack cost?
- →Why does the wedge grow with followers?
- →What does the lab require?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.sec.gov/newsroom/press-releases/2020-321
- https://www.cnbc.com/2020/12/17/sec-charges-robinhood-with-misleading-customers-about-how-it-makes-money.html
- https://www.cftc.gov/PressRoom/PressReleases/8549-22
- https://faculty.haas.berkeley.edu/odean/papers%20current%20versions/individual_investor_performance_final.pdf
Confidence medium·Volatility medium·Reviewed 2026-08-07·Owner unassigned
Contested
R404-05 uses the same SEC order for the cost stack and the meaning of a zero headline price. This lesson uses it for the specific property that a per-order wedge is invisible individually and large in aggregate, applied to copied execution. The split is declared. Keep it.
The erosion figures in part two, being 0.3 percent of latency cost per trade, 0.1 percent of additional slippage per side, a 1 percent platform fee and a 20 percent profit share across 40 trades, are stated inputs so the arithmetic is checkable. Real values vary enormously by platform, instrument and size. Per R410-L the lab requires you to compute them from a specific leader's actual trades at your own size.
J302-01 owns price impact. R404-05 owns the cost stack. This lesson owns the wedge between two accounts following the same decisions. Keep the splits.