Public.com CEO Jannick Malling on the charge for expose accelerate debate

Trading platform public.com now offering options trading retail investors use the platform to trade ETFs Bond stocks crypto and other assets but it hasn't used payment for orderflow in its Revenue model since 2021 until today and we're going to talk about it right now joining us right now with more on the state of the retail traders in the New.

Year Janik Ming he's the CEO of public.com good morning to you good morning here let for the for those that initiated who may not remember the debate that was that really took over the public discourse for a while um about uh about this flow situation why don't you explain what what you decided to do.

Then and what you're deciding to do now right so in our equities business where you're just trading single stocks back after the events of GameStop we decided to abandon the payment for orderflow concept um the maret structure and today we're launching options trading and payment for order flow for those who don't know meant that the citadels of.

The world and other folks who were effectively paying you or paying Robin Hood for every transaction correct and so there was always a question of who was the real customer was the customer the one that actually made the trade or was the customer uh the market maker who was paying you a fee for you to trade on their platform that's been the discourse.

And I think at at the real heart of that discourse is what are your incentives as a Broger dealer and are they aligned with those of your customers right so you stopped doing it yes did that work for you first of all I think it worked incredibly well we proved on many occasions that we saw uh at many times more often than at least better.

Execution because we passed a lot of those savings back into the hands of our customers because they got better execution by us going directly to L exchanges there continues to be a lot of discourse the SEC came out with a proposal as you probably know also denoting that there's some conflict that of Interest here right with regards to.

This model now it's not allowed in Europe for example we should it's not allowed in Europe it's not allowed in Australia either and maybe Canada as well I think now but we should also say that that Ken Griffin who's been on our broadcast before has also said that he believes that he's actually off offering better pricing and that customers that.

Are trading through them where they're paying the payment for order flow actually get a better deal correct so why is he paying for it if it's well so there's a couple of different nuances here also by the way to keep to be mindful of number one the market structure on the equity side is actually quite different from the market.

Structure on the option side so let me explain so if you buy an Apple single stock you know some Market maker pays for almost like the exclusivity to that flow meaning that they will fill that order no other Market maker will see it and so we'll never really know whether another Market maker could have given you a better price now the options.

Trading Market is quite difference in that everything gets executed on Exchange so the market maker in the options trading world is really paying for a right of first refusal or sort of like a first pass on that order but it still goes to the exchange and if another Market maker comes in and offering a offers a better F the.

Customer will see the benefit of that and so what's interesting is the SEC proposal sort of had you know some more lingo around this open auction model yeah that you the well so but now let's pivot to what you're doing today yes because that is a new announcement that actually relates to taking money for payment for order flow absolutely so.

Options training has been one of our most requested features in a long time but due to all the skepticism of how what the incentives are how it all works we fought long and hard about how do we bring this to Market in a way where it's transparent and there is no doubt that our in are aligned with those of our customers and at the end of the day what.

We decided is to pass half of our options trading orderflow Revenue directly back to our customers this means that you are taking payment for orderflow so we will take payment for order on the options model but pass half of it back directly to the customers so it's not just a mechanism that benefits broker dealers and market makers anymore.

But enduser customers get to see the benefit of it as well like this is a stupid question maybe but that sounds like okay we're going to sell the order flow exclusively to one broker we're going to get paid for that but we'll give you some of the savings well we won't go exclusive so in the options Market we will not go exclusive.

Everybody will work with various market makers it'll go to various exchanges so it's a lot more of an open model it's not this like restricted competition model there I still come back why these guys will pay for this like what's to suggest they're not front running I mean why would they pay for the order flow that's been a big kind of question for a.

Long time at the end of the day we're not a market maker so we can't even go directly to the as a broker dealer with this flow so there's no real getting around these market makers in the options trading world like the model that we have for equities we just can't do let ask you this though so this is just a sort of philosophical question.

Those who actually are Advocates of payment for order flow in the equities business would say that in a way MH some part of the payment for order flow is being shared similarly in this case like that you're doing with the customer maybe not 50% maybe it's not very specific about how it's how it's working but the argument would be instead of.

Instead of a Robin Hood paying uh upfront or forcing you rather to pay upfront that there's some shared cost and that the benefit of payment for order flow is allowing people to make trades at a at a effectively a cheaper price right um you buy it you don't people position it as a tradeoff we don't necessarily see it that way we.

Think that there's a Best of Both world scenarios here and that's what we're trying to do with our options model where there's no commission no per contract fees and you actually earn an orderflow rebate for every trade you make question for you some people are now trading with you I think because they like the brand they like what you.

You you're trying to establish and what you mean the other question is how many people you think trade with you or trade with whomever because of the feature set because they like the app better because they I mean what's how does this all work that's an excellent question I think really this this entire space breaks down to two things technology and.

Trust and trust is something that in financial services has been a key term for a long time but I would argue after after FTX after Silicon Valley Bank even after o08 like it's more important than ever and then there's the technology set which has much more to do with what products do you offer how do you research those products and so we've.

Focused a lot on building a multi-asset kind of platform where you can buy bonds and options crypto equities all in one place and then get sort of real 30 seconds you have a take on on bitcoin you know we've seen crypto trading search obviously in Q fall with all these ETF news we're still seeing in the retail Community after those ETFs came.

Online that there's a lot more tra happening in the sort of traditional crypto if you could call it that that's kind of weird to call crypto like that traditional I suppose uh the ETFs are among the more bought ETFs but there's still multiples higher actual crypto volume happening on our platform

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