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Payment For Order Flow

All articles tagged with #payment for order flow

finance2 years ago

Unfair Advantage: How Options Trading Favors the Elite

Large trading firms such as Citadel and Susquehanna are paying brokerages like TD Ameritrade and Robinhood to trade against their customers' orders, taking advantage of unsophisticated retail investors who are lured by the potential for massive overnight wins and zero-commission trading. Retail trading now accounts for up to 60% of the total market volume in options, with the popularity of options that expire daily increasing. However, the vast majority of retail investors lose money in options trading, while the trading firms consistently profit. Regulators should prohibit payment for order flow and penalize misleading advertising practices to protect retail investors. Instead, retail investors are advised to focus on low-cost index funds for long-term wealth building.

via Wealth Management|
#finance#options-trading#payment-for-order-flow
finance2 years ago

"Robinhood CEO Affirms Payment for Order Flow as Permanent Fixture"

Robinhood CEO Vlad Tenev defends the controversial practice of payment for order flow (PFOF), stating that it is "inherently here to stay" in the United States. Tenev argues that PFOF has helped drive down trading commissions and make investing cheaper for consumers. Critics, however, raise concerns about the conflict of interest it creates between brokers and clients. While PFOF is banned in the UK and the European Union, Robinhood plans to launch in the UK. Tenev notes that PFOF accounts for a small portion of Robinhood's revenue, with the majority coming from net interest income. The company has diversified its business to include other areas like securities lending and subscriptions. The rise of Robinhood has forced traditional brokers to slash their fees, leading to industry consolidation.

via CNBC|
#finance#market-makers#payment-for-order-flow
finance2 years ago

Wall Street and Crypto Industry Clash with SEC Chair Gensler over Regulation

Securities and Exchange Commission Chair Gary Gensler's proposal to partially overhaul the US trading system, including replacing payment for order flow with an auction process, is facing serious opposition from Wall Street. The proposal has generated a large volume of comment letters, with many retail investors supporting the idea. However, industry groups such as SIFMA and NYSE, Citadel, and Charles Schwab have recommended that the proposal be withdrawn entirely, citing concerns over market disruption and inadequate cost-benefit analysis. Some are already threatening litigation if the proposal goes through. The SEC will review the comments on all four proposals, which could take several months or longer.

via CNBC|
#finance#gary-gensler#payment-for-order-flow