Dec. 26, 2022
December 26, 2022 I support this rule change. Payment For Order Flow (PFOF) is where a market maker buys the orders from a broker instead of letting a broker shop around. Ordinarily, brokers compete for the best possible prices for shares to match customer orders, and market makers compete for the best possible orders from brokerages. In this case, brokerages shop for shares on behalf of the client. The introduction of PFOF reverses this dynamic. By having brokerages locked to certain market makers, this creates an monopoly that goes against the principles of a fair and free market. Market makers would possess great pricing power and would no longer be obligated to offer best possible execution. Instead, they would widen the bid-ask spread to maximize profit at the expense of retail investors under the lure of free trading. This has obfuscated true price discovery and puts the cost of zero-commission trading onto the retail investor. The price the average joe sees in zero-commission brokerages, like Robinhood, could very well be trading the worst possible price without their knowledge. Under the status quo, the disclosure of such information is insufficient. There can be no genuine trust retail received what they actually paid for.