It might be a problem for institutional investors or other traders who want to trade against that retail order flow that can't do it right now.īecause the bulk of the order flow goes to two main wholesalers, Citadel and Virtu. Is payment for order flow a problem for the overall market? Today, commissions are at zero, so instead of $4.99 a trade in 2019, you're paying nothing other than a small cost for the payment for order flow. Also, execution is way better than it used to be. The spread has tightened across the board. When I started in 1980, it cost $200 to get in on a trade, and $200 to get out, and you might not even get confirmation of the trade for a couple days. No. Retail investors are getting a much better deal than they have ever gotten.
SEC Chair Gary Gensler has repeatedly expressed concern that payment for order flow is a problem for the markets and that banning it is "on the table." Is the retail investor getting ripped off? This interview has been edited for clarity and brevity.
We sat down with Larry Tabb, head of market structure research for Bloomberg Intelligence, for help in understanding payment for order flow. This enables some brokers to charge zero commissions. He also has spoken out about payment for order flow, in which brokers such as Charles Schwab send their orders to market makers in exchange for payments. trading system, specifically "gamification" of trading (trading with game-like features such as points, rewards, leaderboards, bonuses, and competitions to increase engagement). Many of these trades occurred on Robinhood, which subsequently struggled to keep operating.Ģ) Market structure: Gensler has expressed concerns about several aspects of the U.S. 1) GameStop/Robinhood/Reddit: In January, investors in Reddit chatrooms and subreddits like WallStreetBets drove up the value of GameStop shares.
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