The buyers could pay $58.15 and save 10 cents, the sellers could get $58.10 and make an extra 10 cents, and I could keep 5 cents (and avoid the exchange’s fee) for my trouble. I don’t have to pay a fee to the exchange, the buyers don’t have to pay $58.25, and the sellers don’t have to get $58. ![]() 2īut! The broker realizes, look, all these people who want to buy shares could be matched up with all these people who want to sell shares. The broker could send all of its customers’ orders to the stock exchange, where the buy orders would be filled at $58.25 and the sell orders would be filled at $58 the broker would pay the exchange a small fee for executing these orders. The stock exchange has half a million shares of GameStop available for sale at $58.25, and orders to buy half a million shares for $58. One share each, all using market orders, all at precisely the same time. Half of them want to buy shares, half of them want to sell shares. When a brokerage receives a stock market order, they manage the deal through a clearing firm, which routes orders. 1 A million people come to a broker to trade GameStop Corp. Payment for order flow (PFOF)is compensation that broker-dealers receive in exchange for placing trades with market makers and electronic communication networks, which aim to execute trades for a slight profit. ![]() Broker-dealers also receive payments directly from providers, like mutual fund companies, insurance companies, and others, including market makers. Here’s an intuitive description of how it works. Payment for order flow is received by broker-dealers who place their clients’ trade orders with certain market makers or communication networks for execution. Okay let’s do payment for order flow again, because people are talking about it and that always stresses me out.
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