Jul. 18, 2025
Dear SEC, I am a household retail investor. PFOF Brokers and Wholesalers do not represent my interests in any shape or form. Payment for Order Flow (PFOF) has several disadvantages, particularly for household or retail investors. Here are some key drawbacks: Conflict of Interest: PFOF can create a conflict of interest where brokers prioritize executing orders with market makers who pay for the order flow, rather than seeking the best execution for their clients. This may lead to suboptimal execution prices for retail investors. Price Execution: Retail investors might receive inferior prices for their trades compared to what they could have obtained on exchanges with more transparent pricing mechanisms. This can result in higher costs and reduced returns for investors. Transparency Issues: The process of PFOF is often opaque to retail investors, making it challenging for them to understand how their orders are executed and whether they are receiving the best possible execution. Market Fragmentation: PFOF can contribute to market fragmentation by routing orders away from exchanges to off-exchange venues, potentially reducing liquidity and price discovery in public markets. Lack of Control: Retail investors may have limited control over where their orders are routed and how they are executed when their brokers engage in PFOF. This lack of control can affect the quality of trade execution. Potential for Information Asymmetry: Market makers who receive PFOF may have access to order flow information before it is publicly available. This information advantage could potentially be exploited to the disadvantage of retail investors. Regulatory Scrutiny: PFOF practices have faced regulatory scrutiny due to concerns about fairness, transparency, and potential conflicts of interest. Changes in regulatory policies could impact how PFOF is conducted in the future. Impact on Market Efficiency: Critics argue that PFOF may distort market incentives and undermine overall market efficiency by encouraging brokers to prioritize payments over best execution practices. Overall, while PFOF can lower costs for brokers and contribute to their revenue streams, it poses significant risks and disadvantages for retail investors in terms of execution quality, transparency, and potential conflicts of interest. Thank you for your attention to this matter! Brad Delmore