At last count, 57,610 people have signed a petition at Change.org to ban payment for order flow. This practice involves market makers paying brokers for the chance to complete trades.
The market makers claim they complete the trade at slightly better than public market prices while still making a small profit.
At least one study indicates that payment for order flow actually does save customers money, especially considering that it removes the need for commissions. However, both Citadel Securities LLC and Robinhood Markets, Inc. have been fined for providing worse prices than public exchanges.
I favor not a ban, but more careful regulation of payment for order flow. I think the SEC should require brokers like Robinhood and market makers like Citadel to release data on a regular basis proving that they’re getting customers better prices than public exchanges.
Both companies are world class experts in data aggregation and analysis. They’re more than up to the task.
This type of regulation would allow retail traders to continue to trade commission free while also making sure they’re protected.
Meanwhile, if an investor doesn’t want their order sold to a market maker, Interactive Brokers offers such an account. But sure enough, it’s not free.
Many companies also sell investors their stock directly, no broker needed. Such a plan could be a great service for companies like AMC Entertainment Holdings, Inc. and GameStop Corp. to pursue.
So, will you be the signing petition? Let me know in the comments at the very bottom of the page.
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