12/9/2023 0 Comments Payment to order flow![]() ![]() It's the exact timing of the transaction that's affected, which then could affect the price you buy or sell the stock for. Keep in mind that PFOF doesn't compromise the security of your investment account, nor is the money in your brokerage account being held hostage against your will. After you place the order, your brokerage will send it to a market maker who carries out the actual trade.ĭropping an app or brokerage that uses PFOF is ultimately up to you to decide. When your broker sends a stock or option order to a market maker, the third-party firm pays the brokerage to execute it.įor instance, if you placed a buy order for 20 shares of Amazon ( AMZN) stock with a brokerage that receives PFOF, your order will make a pit stop before it gets fulfilled. This rule requires brokerages that use PFOF to provide public disclosures on their order routing practices on a quarterly basis. If you'd like to learn more about market makers' order routing and order execution practices, you can generally find public disclosures on their websites, thanks to SEC Rule 605. The firm profits due to the difference between what they paid for the security and what they're selling it to you for This allows your investment app to send your order to another division of its company for execution. Your broker may execute trades through a process known as internalization.Brokers can also route orders to electronic communications networks (ECNs) that can match buy or sell orders at certain prices.If your stock trades in an over-the-counter (OTC) market, the brokerage can sell the order to an OTC market maker firm that executes your order.
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