Payment for order flow
MarketsDefinition
Brokers route customer orders to wholesale market makers in exchange for a small per-share rebate. The market maker captures a slice of the bid-ask spread. Funds zero-commission retail trading at Robinhood, Schwab, Fidelity.
Controversial: skeptics argue customers get marginally worse fills; brokers and Citadel argue execution quality is better than the lit exchanges. SEC mulled banning PFOF after the GME saga; currently still allowed but more transparent.
Controversial: skeptics argue customers get marginally worse fills; brokers and Citadel argue execution quality is better than the lit exchanges. SEC mulled banning PFOF after the GME saga; currently still allowed but more transparent.