In late morning trade the S&P/ASX 200 Index (ASX: XJO) has continued its positive run and is pushing higher. At the time of writing, the benchmark index is up 0.7% to 6,680.6 points.

Four shares that are climbing more than most are listed below. Here’s why these shares are storming higher:

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price is up 4% to $21.44. Investors have been buying the iron ore producer’s shares after the price of the steel making ingredient continued its ascent. On Friday the spot iron ore price jumped a further 5.4% to US$145.30 a tonne. This has been driven by strong demand and news that mining giant Vale is cutting its production guidance.

Metcash Limited (ASX: MTS)

The Metcash share price has jumped 9% higher to $3.51. This follows the release of a strong half year result this morning. For the six months ended 31 October, the company reported a 12.2% increase in group revenue to $7.1 billion and a 43% lift in underlying profit after tax to $129.6 million. This was driven by strong growth across all its segments during the half.

Nuix Ltd (ASX: NXL)

The Nuix share price has surged a further 14% higher to $9.10. Investors have been fighting to get hold of the investigative analytics and intelligence software provider’s shares since it listed on the Australian share market last week. The Nuix share price is now up over 71% since hitting the ASX boards at a listing price of $5.31.

Xero Limited (ASX: XRO)

The Xero share price has pushed 2.5% higher to $136.28. The catalyst for this has been a broker note out of Goldman Sachs this morning. According to the note, Goldman has initiated coverage on the cloud-based business and accounting software company’s shares with a buy rating and $157.00 price target. Goldman Sachs likes Xero due to the quality of its offering, its large and growing total addressable market (TAM), and its attractive unit economics.

More reading

• Metcash (ASX:MTS) share price jumps 8% after strong first half growth
• Why ASX iron ore stocks are set to rally today
• Leading broker puts buy rating on Xero (ASX:XRO) share price
• 5 things to watch on the ASX 200 on Monday
• How to get a passive income of $50,000 per year from ASX dividend shares

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

NVIDIA Corporation‘s (NASDAQ: NVDA) data center business was in the limelight recently as the company warned of a sequential slowdown in this segment after six consecutive quarters of growth. But investors need not be worried about its data center prospects, as the business has multiple catalysts, including a new opportunity that is worth paying close attention to.

The graphics specialist pointed out in its last earnings release that it introduced a new chip during the quarter: the BlueField-2 DPU (data processing unit). Let’s see why this chip could unlock a big revenue opportunity for NVIDIA and strengthen its hold over the data center market.

NVIDIA makes another move in data center accelerators

NVIDIA’s graphics cards have been accelerating data center workloads for quite some time now, outperforming traditional CPUs (central processing units) thanks to their massive computing power that helps quickly execute tasks at a fraction of the cost. The rapidly expanding data center accelerator market is estimated to be over $21 billion by 2023.

NVIDIA’s launch of a DPU in October gives it an opportunity to capture more of the market. DPUs are considered to be a new type of data center accelerators after CPUs, GPUs, and field-programmable gate arrays (FPGAs).

According to NVIDIA, DPUs are going to play a critical role in data centers by complementing the tasks performed by CPUs and GPUs. The chipmaker points out that while CPUs can perform general tasks and GPUs can accelerate heavy workloads in a data center, DPUs are responsible for the efficient transfer of data to other components, and also take care of workloads related to artificial intelligence, machine learning, and other applications.

In simpler words, NVIDIA aims to make data centers faster and more efficient with the BlueField-2 DPU. As it said when the product was launched. “A single BlueField-2 DPU can deliver the same data center services that could consume up to 125 CPU cores. This frees up valuable CPU cores to run a wide range of other enterprise applications.”

The DPU is a hot commodity already

It has been just two months since NVIDIA launched BlueField-2, and the chipmaker has already scored a big customer for the chip in VMware. The cloud computing player is deploying DPU-enabled smart network interface cards (SmartNICs) across millions of virtualized servers. What’s more, NVIDIA says that it is sampling the DPU with major hyperscale OEMs (original equipment manufacturers) as well as enterprise server manufacturers.

NVIDIA said in October that Red Hat, Canonical, and Check Point Software Technologies are either supporting BlueField-2 DPUs or integrating them into their offerings. Dell Technologies, Asus, Lenovo, and Fujitsu are some of the names that are expected to offer NVIDIA’s DPU with their enterprise servers.

As such, it won’t be surprising to see more data center infrastructure equipped with NVIDIA’s DPU come out in the future and help the company sustain the impressive momentum of this business. The data center business recorded 162% year-over-year growth last quarter and generated 40% of the total revenue.

The DPU market could help the data center business switch into a higher gear and help NVIDIA remain a hot growth stock.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 10 most searched shares in Australia

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends NVIDIA. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends VMware. The Motley Fool Australia has recommended NVIDIA. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Westpac Banking Corp (ASX: WBC) has sold its Pacific operations to Kina Securities Ltd (ASX: KSL) for $420 million.

The Australian bank announced to the ASX before Monday’s opening that Westpac Fiji and Westpac’s 89.91% ownership in Westpac Bank PNG will be handed over to Kina Bank sometime before September.

The two arms are currently known together as Westpac Pacific. The business generated cash earnings of about $11 million for the bank’s 2020 financial year.

As of the end of September, Westpac Pacific had $580 million in net assets, $1.58 billion on its loan books, deposits of $2.34 billion and risk-weighted assets totalling $2.9 billion.

Westpac exiting non-core businesses

Westpac specialist businesses and group strategy chief Jason Yetton said the sale occurred from the company’s decision to focus on its core domestic operations.

“We are taking another step in becoming a simpler, stronger bank while ensuring a high standard of banking services is maintained for our Pacific customers.”

As part of the same strategy, Westpac last week sold Westpac General Insurance and Westpac General Insurance Services to Allianz for $725 million.

Yetton said Kina Bank is the right buyer for Westpac, its staff and the customer communities.

“We are pleased our Pacific businesses are being acquired by Kina Bank. Kina is a strong brand in the region and is well positioned with deep local knowledge to continue to help our consumer and business customers succeed.”

Westpac revealed $315 million would be payable at the completion of the transaction, which still has regulatory approvals to cross. Another $60 million will be paid afterwards in six-monthly instalments for Westpac PNG, plus up to $45 million in annual earn-out payments for Westpac Fiji.

“It is expected there will be an accounting loss on sale of approximately $230 million, including a foreign currency translation reserve (FCTR) loss which will be based on exchange rates on completion,” announced Westpac.

Kina Bank is a Papua New Guinean financial services company that is listed on the ASX, with a market capitalisation of $235.8 million, and on the Port Moresby Stock Exchange.

Westpac’s announcement comes after a rough week in which it agreed to an enforceable undertaking with the Australian Prudential Regulation Authority (APRA) to improve its risk governance.

APRA found the bank had an “immature and reactive risk culture, unclear accountabilities, capability shortfalls and inadequate oversight”.

More reading

• 5 things to watch on the ASX 200 next week
• Here are the ASX bank shares rated as a buy today
• Westpac (ASX:WBC) share price lower on APRA enforceable undertaking news
• ASX 200 flat on Wednesday
• ASX 200 down 0.2%: Zip’s November update, Mesoblast jumps, Westpac’s asset sale

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The MedAdvisor Ltd (ASX: MDR) share price has been a positive performer on Monday morning.

At the time of writing, the medication management platform provider’s shares are up 2.5% to 40 cents.

Why is the MedAdvisor share price pushing higher?

Investors have been buying the company’s shares this morning after the release of a trading update.

According to the release, MedAdvisor’s US subsidiary, Adheris, has been performing better than it anticipated since being acquired on 17 November.

In light of this, the company is expecting Adheris’ revenue to be higher than the guidance it previously provided.

For the period 1 July to the end of November, Adheris achieved revenue of US$14 million. This compares to half year revenue guidance of US$13.8 million.

This appears to have been driven partly by the signing of a one-year deal with a major US biopharmaceutical company at the end of last month. The unnamed US$70 billion biotech giant is leveraging its data and analytics platform to target patient awareness and adherence across the Adheris network.

FY 2021 guidance upgrade.

Pleasingly, management expects this outperformance to continue in the second half and has lifted its full year Adheris guidance.

For the 12 months, the company was forecasting Adheris to deliver revenue of US$26.4 million. It now expects this to be 7.5% higher at US$28.4 million. Management advised that this represents 12.2% growth year on year.

MedAdvisor’s CEO and Managing Director, Robert Read, commented: “We’re pleased to confirm that trading for the half-to-date for our newly-acquired Adheris subsidiary has exceeded $14m USD with one month of trading to go.”

“Our investment thesis and diligence had sought to confirm that the Adheris business was delivering growth which could be accelerated with MedAdvisor’s technology across the substantial scale the business had built over the last 25 years. We are pleased to see the core business improve its growth trajectory and look forward to investing in growth initiatives that will accelerate this even further,” he concluded.

More reading

• MedAdvisor (ASX:MDR) share price shoots up 8% today. Here’s why.
• 2 ASX small cap healthcare shares growing quickly
• Why Afterpay, Goodman, MedAdvisor, & PointsBet shares are dropping lower
• Why the MedAdvisor (ASX:MDR) share price jumped 9% on Friday

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MedAdvisor. The Motley Fool Australia has recommended MedAdvisor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Event Hospitality and Entertainment Ltd (ASX: EVT) share price has dropped 4.68% in early trade, after the company announced the sale of its German cinemas business Cinestar may not go through. This, because the sale may miss the 14 December deadline imposed by the German regulator.

At the time of writing, the Event Hospitality share price is trading down at $10.39.

Why the deal may miss the deadline

Event Hospital is in the process of selling its German cinema business to Vue International. However, the sale is subject to German Federal Cartel Office (FCO) approval, which requires Vue International to divest six of the sites.

In October, Event Hospital said that Vue has managed to divest one of the six sites, with a final deadline of 13 November to divest the remaining five sites. That deadline imposed by the FCO has since been extended to 14 December.

In today’s announcement, Event Hospitality advised the divestment process for the remaining five sites was well advanced with a shortlist of three buyers. All three have received in-principle approval from the FCO subject to final review of the transaction documents.

However, Vue International has now sought to renegotiate the terms of the Cinestar sale and put a pause on the divestment. 

Event Hospitality said discussions were ongoing, but Vue’s most recent proposal made it clear there was a material risk that Vue would not complete the divestment by the FCO’s December deadline.

Should the divestment not occur in that time, the Cinestar sale will be prohibited by the FCO.

More about Event Hospitality

Event Hospitality operates hotels, resorts and cinemas, with operations in Australia, New Zealand and Germany dating back to 1910. It has been listed on the ASX since 1962.

Its cinema brands include Event Cinemas, Birch, Carroll and Coyle, Greater Union, GU Film House, Moonlight Cinema, Sydney State Theatre, and of course Cinestar.

In the its full year results to 30 June 2020, Event Hospitality had revenue of $410.64 million, a decline of 24.1% compared to the prior year.  The company reported a loss of $11.37 million for FY20.

About the Event Hospitality share price

The Event Hospitality share price has almost doubled its 52-week low of $5.44. However, it has fallen more than 20% since the beginning of the year. Event Hospitality commands a market cap of $1.75 billion.

More reading

• Why the MedAdvisor (ASX:MDR) share price is pushing higher today
• Why the SelfWealth (ASX:SWF) share price is rising 5% today
• Here’s why the Crown (ASX:CWN) share price is pushing higher today
• How I’d replace my entire wage with a passive income from dividend shares
• Why the Mesoblast (ASX:MSB) share price is charging higher today

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The SelfWealth Ltd (ASX: SWF) share price is on the rise today. This comes after the company announced that United States (US) trading for SelfWealth retail clients will be launching on 14 December 2020. At the time of writing, the SelfWealth share price is up 5.36% to 59 cents.

What’s driving the SelfWealth share price higher?

The SelfWealth share price is marching higher following an expanded offering to its retail customers.

According to the release, SelfWealth advised that, from today, its 65,000 active members will have the option to submit a request to have the US trading feature added to their portfolios. For any new clients joining SelfWealth after 14 December, a selection for the trading feature will be available during the sign-up process.

The US feature will include a cash account, which will use FX rates when transferring funds across international accounts. The company said that over 7,500 US securities can be accessed between the major exchanges, with a flat-fee brokerage of US$9.50 per trade.

No fees will be charged with the opening of the new trading feature.

To assist in the smooth transition, SelfWealth has integrated the new addition with its ASX trading platform. Furthermore, new mobile applications for iOS and Android are expected to be released later this month.

SelfWealth stated that it anticipates a strong uptake of the new feature from its existing customer base and acquisition rates.

Management commentary

SelfWealth managing director, Mr Rob Edgley, commented on the new offering, saying:

For years, SelfWealth has been growing strongly off the back of disillusioned investors that have been overpaying to invest. Now, they can invest in the US and the ASX in one convenient place at a reasonable price. There’s now no need for multiple trading accounts and apps to access some of the most popular stock markets, and SelfWealth members will have a US Cash Account to help them avoid foreign exchange fees on every trade.

Our hard-working team will now turn their efforts towards providing additional functionality and new products across the trading platform. We’re looking forward to announcing these additions in the new year.

SelfWealth share price summary

The SelfWealth share price has been climbing higher since the start of April, gaining over 440%. The company hit a 52-week low of 9.5 cents in March and reached an all-time high of 82 cents in September.

Although the SelfWealth share price has settled back to 59 cents, the company has been making tailwinds this year. Its active trader base has increased by 35% from FY20 numbers, to 65,000.

More reading

• Here’s why the Crown (ASX:CWN) share price is pushing higher today
• How I’d replace my entire wage with a passive income from dividend shares
• Why the Mesoblast (ASX:MSB) share price is charging higher today
• How do zero-fee share trading apps make money?
• Metcash (ASX:MTS) share price jumps 8% after strong first half growth

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Crown Resorts Ltd (ASX: CWN) share price is pushing higher on Monday morning after the release of an announcement.

At the time of writing, the casino and resorts operator’s shares are up 1% to $9.90.

What did Crown Resorts announce?

This morning Crown released an update on its operations in Melbourne. This follows an announcement by the Victorian Government at the weekend in relation to the easing of COVID-19 restrictions.

According to the release, the easing of restrictions means that gaming operations at its Crown Melbourne are about to get a whole lot busier.

Crown notes that the number of members of the public permitted at any one time is limited to 50% of the maximum capacity for the facility stated in the occupancy permit.

Furthermore, the number of members of the public permitted in each indoor space at any one time is limited by the density quotient of one person per four square metres.

Though, as always, physical distancing and hygiene protocols remain in place throughout its casino.

When are the changes due to take place?

Management advised that it expects to commence operating under the revised directions from this Wednesday.

It also revealed that it continues to engage with the Victorian Government in respect to the implementation of the directions.

What’s next for Crown?

With Crown Melbourne returning to relatively normal trading, all eyes will now be on the new Crown Sydney operation.

Last month it was prevented from opening its gaming operations due to money laundering concerns.

The New South Wales Independent Liquor and Gaming Authority (ILGA) intends to wait until it has seen the final report from an ongoing inquiry, which is due in February, before deciding whether to grant it a gaming licence in the state.

More reading

• Crown Resorts (ASX:CWN) share price is up 6% despite Fitch downgrade
• ASX 200 rises again on Monday
• Why the Crown (ASX:CWN) share price is dropping lower again today
• Why a2 Milk, Crown, Immutep, & Suncorp shares are dropping lower
• ASX 200 down 0.3%: Altium FY 2021 guidance, Crown drops, insurance shares sink

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Replacing an entire wage with the passive income from dividend shares could be a more realistic aim than it appears at first glance. Certainly, this year’s stock market crash has highlighted the risks of holding shares. However, with low interest rates and high property prices, there may be few other options to make a worthwhile income elsewhere.

Through purchasing a diverse range of dividend shares with affordable payouts, it may be possible to generate a high and growing income over the long run.

A resilient passive income from robust dividend shares

Clearly, the most important aspect of a passive income that replaces an entire wage is its reliability. There is little point in having high-yielding dividend shares that do not provide stability in terms of their payouts over the long run.

As such, assessing the resilience of a company’s dividend is of great importance. This can be undertaken through analysing its affordability. Comparing net profit to dividends shows how many times a company could pay its dividend. If it is easily covered by profit, and could be paid several times over, it suggests that the business in question may be able to maintain shareholder payouts even if sales and profitability decline.

Furthermore, a passive income from a company with defensive characteristics may be more valuable than a payout from a cyclical business. Defensive stocks may be less impacted by an economic downturn than cyclical shares. This may lead to a more reliable income over the long run – especially given the presence of risks such as the coronavirus pandemic.

Dividend growth opportunities

A growing passive income may become increasingly important in the long run. The large amounts of monetary policy stimulus that have been used to counter this year’s decline across major economies may lift inflation in the coming years.

As such, investing money in dividend shares that can realistically grow their shareholder payouts could be a shrewd move. For example, they may pay out a low proportion of net profit as a dividend. This could indicate that they can afford to make larger shareholder payouts. Similarly, a company with upbeat profit prospects could decide to raise dividends at a fast pace.

Diversifying an income stream

It may be tempting to purchase the highest-yielding stocks for a passive income and disregard other companies. However, the uncertain economic outlook means that building a diverse portfolio of stocks is more important than ever. Some sectors and regions may experience a prolonged period of difficulty that causes their dividend growth to slow.

A diverse portfolio of shares can offer a more resilient income return over the long run. It may be able to replace an entire wage if the amount invested is large enough. It may also provide capital growth over the long run as the stock market recovers from the challenges faced this year.

More reading

• Why the Mesoblast (ASX:MSB) share price is charging higher today
• How do zero-fee share trading apps make money?
• Metcash (ASX:MTS) share price jumps 8% after strong first half growth
• Why ASX iron ore stocks are set to rally today
• 3 great ASX tech shares to buy

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Mesoblast limited (ASX: MSB) share price has started the week strongly and is charging higher.

In early trade the allogeneic cellular medicines company’s shares are up 3% to $4.45.

Why is the Mesoblast share price pushing higher?

Investors have been buying the company’s shares this morning after its revealed results from a study of its remestemcel-L product in children with steroid-refractory acute graft versus host disease (SR-aGVHD).

According to the release, the results provide in vivo biomarker evidence linking remestemcel-L’s immunomodulatory activity to survival outcomes in children with SR-aGVHD.

Management advised that the study found that clinically meaningful overall responses and survival in children with SR-aGVHD treated with remestemcel-L were associated with significant reductions in certain biomarkers of inflammation which have been validated as predictors of mortality risk.

These biomarkers provide evidence of in vivo bioactivity of remestemcel-L in paediatric SRaGVHD, where children under 12 are at high-risk for mortality, with no approved therapies in the United States.

Furthermore, the durable reductions in blood levels of certain biomarkers associated with inflammatory diseases of the gut suggest that these could be more generally reflective of remestemcel-L activity in vivo in other inflammatory bowel diseases, such as Crohn’s disease and ulcerative colitis.

The phase 3 trial’s lead investigator and paediatric transplant physician, Dr Kurtzberg, commented: “These results support the bioactivity of remestemcel-L in treating the severe inflammation in children with acute graft versus host disease refractory to steroids and provide evidence linking the immunomodulatory properties of remestemcel-L with the excellent responses and survival we see when treating these desperately ill children.”

Judging by the share price reaction, investors may be optimistic that this data will support its push to get the treatment approved by the US Food & Drug Administration.

The Mesoblast share price crashed lower in October after the regulator didn’t approve the treatment and instead requested that the company undertakes at least one additional randomised, controlled study in adults and/or children. This is to provide further evidence of the effectiveness of remestemcel-L for SR-aGVHD.

More reading

• Why Fisher & Paykel Healthcare, Mesoblast, Splitit, & WiseTech are dropping lower
• The Mesoblast (ASX:MSB) share price jumped 33% in November and could go even higher
• ASX 200 flat on Wednesday
• Why Laybuy, Mesoblast, Sandfire, & Telix shares are charging higher
• ASX 200 down 0.2%: Zip’s November update, Mesoblast jumps, Westpac’s asset sale

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In the United States, zero-brokerage share trading platforms are now the norm.

It all started with the wildly popular Robinhood mobile app, and the more traditional online brokers were forced to follow.

So how is it that these platforms let users buy and sell for no fee? How does the software recoup its costs, let alone make a profit?

It’s because of PFOF. Payment for order flow.

All the US exchanges, such as NASDAQ and NYSE, have this mechanism and it works like this:

1. The investor submits an order to sell or buy through the online broking app.
2. The app passes the order to a third party called a ‘market maker’ (also known as a high-frequency trading firm) that will actually perform the transaction.
3. The market maker pays the trading platform a small fee for orders coming its way.
4. When the market maker actually performs the transaction, it will buy the shares at a fraction lower price than what it sells for. The market maker pockets this difference, called the bid-ask spread.

So zero-brokerage platforms are entirely reliant on the fees from the market maker for their revenue.

On face value, it seems like the user doesn’t get the best price for her or his order. But Stake chief executive Matt Leibowitz told The Motley Fool that PFOF is an incentive for liquidity.

“There are 13 exchanges in the US and they’re competing for flow,” he said.

“So what they do to provide liquidity is they actually provide a rebate. So if you make liquidity, you get paid say 10 cents. If you take liquidity, you pay 15.”

The exchange generates its revenue from that 5 cent difference. And the PFOF acts as a way to encourage liquidity into its own share market, away from its rival exchanges.

PFOF is lucrative business now

PFOF has always existed. It’s just zero-brokerage apps charge more for it than the traditional platforms did.

“Assume the average stock traded has a share price of $50. It takes 20,000 shares traded at $50 for $1,000,000 in volume, for which E-Trade makes $22 per $1,000,000 traded, which sounds like a small number until you realise they cleared $47,000,000 last quarter from this,” North of Sunset Capital Management founder Logan Kane told CBInsights.

“But off an identical $1,000,000 in volume, Robinhood gets paid $260 from the same [high-frequency trading] firms. If Robinhood did as much trade volume as E-Trade, they would theoretically be making close to $500 million per quarter in payments from [high-frequency trading] firms.”

CBInsights has noted that the cosy relationships between Robinhood and the market makers have caused the platform “significant legal headaches”. 

“The Financial Industry Regulatory Authority (FINRA) fined Robinhood $1.25 million in December 2019 for ‘best execution violations’, and the company remains under investigation by the SEC for its failure to disclose its relationships with market makers until 2018,” its analysis reads. 

“Should the SEC find Robinhood to be in violation, the company could face fines of up to $10 million.”

For Robinhood specifically, it does have an alternative source of income with margin lending available to users who pay a subscription fee.

The free brokerage and the low transaction minimum is dangerous for novice investors, an academic warned earlier this year.

“These trading apps encourage addiction and gambling,” RMIT senior lecturer Angel Zhong told The Motley Fool.

“A big selling point of these apps is the low transactional threshold, which encourages investors to buy low-priced stocks. In finance research, low price [is] a feature associated with what we called the ‘lottery-like’ stocks. They are highly risky.”

More reading

• Metcash (ASX:MTS) share price jumps 8% after strong first half growth
• Why ASX iron ore stocks are set to rally today
• 3 great ASX tech shares to buy
• Could AstraZeneca be a millionaire-maker stock?
• Leading broker puts buy rating on Xero (ASX:XRO) share price

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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