Curriculum·S209 The Centralized Exchange in Depth·about 40 min
Fees, tiers, and the real cost of activity
By the end of this lesson you can
- →Enumerate every charge on an exchange account, including the ones with no line item
- →Explain how a tier structure transfers cost from high-volume participants to low-volume ones
- →Compute your own effective all-in rate from your statement rather than from the schedule
- →Reduce the components you control, and identify the ones you cannot
Sophomore · enrolled learners
This lesson opens with Commission free, and the $34.1M it cost.
- What happened
- The US Securities and Exchange Commission's December 2020 order found that Robinhood Financial had made misleading statements and omissions between 2015 and late 2018 about payments it received from trading firms for routing customer orders to them, and had failed to satisfy its duty of best execution. Because its payment-for-order-flow rates were unusually high, customer orders were executed at prices inferior to those available from other brokers, and the order found the resulting harm amounted to $34.1M even after accounting for what customers saved by not paying commissions. The firm also stated between October 2018 and June 2019 that its execution quality matched or beat competitors, and paid $65M to settle without admitting or denying the findings.
- The decision point
- The commission was the number every customer could see, and it was zero. The execution price was the number no customer could see, and it was where the cost went. A fee schedule describes the charges a venue has chosen to itemise, which is a different set from the charges it collects.
- Recorded loss
- $34,100,000
What you will be able to answer
- →What does a fee schedule describe?
- →How does a tier structure move cost around?
- →What is the maker-taker distinction?
- →How do you compute your effective rate?
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.sec.gov/files/litigation/admin/2021/34-92115-dp.pdf
- https://onlinelibrary.wiley.com/doi/abs/10.1111/0022-1082.00226
- https://www.coindesk.com/research/market-spotlight-the-19-billion-liquidation-that-shook-crypto
Confidence high·Volatility high·Reviewed 2026-08-06·Owner unassigned
Contested
F107-05 teaches the all-in round trip at Freshman level using this case. This lesson covers tier structure, the full charge inventory and computing an effective rate from a statement. Keep the split.
Robinhood settled without admitting or denying, which must always be stated, and payment for order flow is legal in the United States and restricted elsewhere. The lesson uses the order for what it established about unitemised cost, not to argue the practice is inherently wrong.