I believe a critical part of this is false: Citadel does not front run on order flow (front running is illegal).
They buy order flow from robinhood because retail traders don't know what they're doing, and that goes doubly for Robinhood, making their order flow generally random noise.
Institutional order flow is not random, and is often right; processing winning trades is less profitable than random ones, and so Citadel pays more for RH order flow.
They buy order flow from robinhood because retail traders don't know what they're doing, and that goes doubly for Robinhood, making their order flow generally random noise.
Institutional order flow is not random, and is often right; processing winning trades is less profitable than random ones, and so Citadel pays more for RH order flow.