Any investor who buys $HOOD while also wanting PFOF banned and the Evil HFT firms punished is a hypocrite
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question: if pfof banned, it should be no big deal for market maker right? Since they provide liquidity and better execution than NBBO, brokers should still send orders to them, without paying though. So banning pfof only hurts robinhood business model?
That’s my assessment as well: PFOF is a tool in the toolbox for MMs to get flow, but its Robinhood’s entire lifeblood. If PFOF is banned MMs have to change a little, Robinhood has to change a lot.
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thanks for your reply！
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sorry one more question, if Pfof only benefit brokers, then maker maker such as virtu and citadels may also want to ban pfof as well? Cause it means less cost for them to get order flows?
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They can internalize order flow
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true, but 80% of their revenue would go away in that case. They can internalize all they want but if PFOF were banned their primary source of revenue would evaporate overnight.
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I'm not sure I see the point of eliminating PFOF if you don't also address issues that keep order flow off exchange. Addressing PFOF should mean a higher bar for off exchange execution, ala Canadian dark rules. I've never thought of PFOF in isolation, seems like a red herring.
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I don't disagree, off-exchange execution has become more attractive because of: 1) secrecy - less likely to get picked off/info leakage 2) cost effectiveness - can do better than NBBO It's hard for an exchange to compete in today's environment
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