Template:M intro disaster Payment for order flow: Difference between revisions

Template:M intro disaster Payment for order flow (view source)

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-Oh lord, where to start.
+{{d|Payment for order flow|/ˈpeɪmənt fər ˈɔːdə fləʊ/|n|}}
+An arrangement between a securities [[broker]] and its favourite [[market-maker]] where the [[market-maker]] pays the broker to steer its client order-flow to the market maker, allowing the broker to charge lower, or nil, commissions to their retail clients.
-Payment for order flow was a big deal in Europe for years, and the Americans — usually such fastidious over-regulators — have been strikingly blasé about it. Much of the American love of playing the markets depends on it, in fact.
+It was a thing in Europe for years, and the Americans — usually such fastidious over-regulators of this kind of thing — have been strikingly blasé about it, and it ''remains'' a thing. The American love of playing the markets so depends on it, in fact, that before 2021, the [[JC]] often heard it confidently expressed that there was ''zero'' chance of the [[SEC]] limiting [[PFOF]] because the Americans retail market so loves its commission-free brokerage accounts. My American pundit friends have been less garrulous since [[GameStop]], but they are still quietly, superciliously confident it won’t be any time soon.
-All this was brought into sharp, public relief, in the great [[market un-crash]] of January 2021, when the massed armies of the investing public — for so long a huge, docile cow, tethered to the stall and irretrievably wired into the great [[financial services]] milking machine — woke up and decided to have things their way for once.
+In any case it was all brought into sharp, public relief, in the great [[market un-crash]] of January 2021, when the massed armies of the investing public — for so long a huge, docile cow, tethered to the stall and irretrievably wired into the great [[financial services]] milking machine — woke up and decided to have things ''their'' way, for once.
-Said milking machine reacted rather petulantly. In the mean time a great awakening was happening. In a turn of events that is rather characterising the digital revolution, the denizens of Reddit discovered they were the ''product'', not the ''customer'', and the means of that transmission was [[payment for order flow]].
+Said milking machine reacted a bit petulantly, complaining about these nasty, predatorial day traders in their tracksuits making life hard for the brokers and their time-honoured, noble, sacred pursuit of extorting the American public. In the meantime, a turn of events characteristic of the information revolution, a great awakening was happening within the Reddit day-trader community, who discovered they were the ''product'', not the ''customer'', and the means of that transmission was [[payment for order flow]].
-===What is PFOF?===
+===What ''is'' PFOF?===
-The theory is — ought to be — when your order is filled you pay your broker a commission. Your broker has all kinds of regulatory obligations — the key ones are generally lumped together and called “[[best execution]]” — to make sure you get the best price available. This keeps the broker honest.
+The theory is — ought to be — that when your order is filled you pay your broker a commission. Your broker has all kinds of regulatory obligations — the key ones are generally lumped together and called “[[best execution]]” — to make sure you get the best price available. This keeps the broker honest.
 Okay. Now a broker fills your order by going to the market. In practice this means The broker will interrogate [[market maker|market makers]], [[Exchange|exchanges]] and other sources of market liquidity ([[Multilateral trading facility|multilateral trading facilities]] [[dark pool]]s and so on), to identify that best price, retrieve it and bring it back for you.