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In the idealized form of this arrangement, the MM, broker, and retail investor all “win”. PFOF results in a tighter spread paid by retail traders for the service of instant liquidity, the brokers get a new revenue stream, and MMs get better, less toxic flow.

So why all the anguish over PFOF? Let's review arguments against such as they are.

the first argument against PFOF cuts directly against the argument for it: the argument is that price improvement figures are overestimated and that retail traders are not getting better prices.

The NBBO putatively represents the best bid and offer price for any given stock, but it turns to not necessarily be the case. Odd lot orders—orders for fewer than 100 shares— placed inside the NBBO are exempt from the NBBO calculation.

In addition, there is dark pool liquidity which is often priced at the NBBO midpoint and also not factored in.

The second argument against PFOF is that having retail on exchange would tighten spreads. One important thing to note about PI statistics is that they assume that the NBBO spread is static, but it isn’t. In fact it’s quite likely that the spread would change with retail flow.

Since lit market market makers have to interface with statistically more toxic flow, they have to quote wider spreads to compensate for the “cost” implicit in trading with that flow. So the argument is that making lit flow less toxic would cause MMs to quote higher spreads.

The third and final argument against PFOF is that there is a data/information advantage that is conferred to MMs because they get to see retail flow first.