Payment for order flow

[4] Policymakers supportive of PFOF and several people in finance who have a favorable view of the practice have defended it for funding new investment apps, low-cost trading, and more efficient execution.

[1] Market makers including Citadel LLC, Virtu Financial, and Susquehanna International Group pay PFOF.

[7] In 2014, broker-dealer Robinhood Markets introduced no-commission retail stock trades funded by payment for order flow.

[14] Rather than direct payment through shares, brokers sold their orders en masse to market makers that executed the trades, paving the way for short squeeze crashes and meme stock frenzies.

[18][19] U.S. Securities and Exchange Commission rule 606(a), implemented in 2001, require all brokerage firms to make publicly available quarterly reports describing their order routing practices.

The report provides transparency in this area, allowing investors to understand how their orders are routed and executed, and to identify any potential conflicts of interest.

The rule has undergone several amendments to keep pace with the evolving market structure, technological advancements, and trading practices.

[26] PFOF dates back to at least 1984 as noted in the 1993 remarks of Richard Y. Roberts, Commissioner, U.S. Securities and Exchange Commission (SEC), entitled "Payment for Order Flow" in regards to a letter from Richard G. Ketchum, Director, Division of Market Regulation, SEC, to John E. Pinto, Senior Vice President, NASD, dated October 5, 1984: When the Commission first became aware of payment for order flow practices in the OTC market in late 1984, the Division of Market Regulation ("Division") wrote to the National Association of Securities Dealers ("NASD") to express its concerns and to request that the NASD "consider possible measures to address any problems observed in this area".

In the ensuing years, the Commission has requested information from the NASD and the exchanges to determine the extent of payment for order flow practices.