PFOF has been going on for years and even decades in straight equity. Thats the way the markets work and its not going to change. The NSADAQ/PHLX has one of the best platforms these days and thats why they have gained huge market share in volume they're not being artificially kept open by any means. PFOF does not supersede the NBBO so the retail customer gets the NBBO no matter where the order is sent. PFOF is a deal between the brokers who send your orders and the MM firms. The BOX has that auto price improvement which is just a different model of PFOF but in the end itâs the same for the retail client. How do you think brokerages can offer such low commissions for retail order? They subsidize the costs with PFOF.
I have no problem with PFOF in equities because it is done the right way, it is a taker model where the person that removes liquidity pays. In the equity options market it is backwards. What does this have to do with the price of tea in China? What? What does PFOF have to do with NBBO? So in the entire rest of the markets, I can route orders anywhere I want without my broker intervening without any such arrangements, to no detriment to the said businesses, but in equity options it's different this time? What???? Look, I am sick, but I have no idea what you are talking about. You are talking about auto price improvement being the same as PFOF? Maybe I need to take some pseudafed. LMAO. So the entire rest of the industry, whether it be FX, futures, commodities, currencies, equities, options of any of those, EXCEPT OPTIONS ON EQUITY, doesn't have this problem, but equity options do? Incidentally, if I remember correctly, there is no PFOF on ETFs options. So, what's the real deal? Raise my comission and charge me whatever you need to in order to make your business a profitable one. Don't mix apples and oranges. First, MMs in equity options have to pay to get order flow. Then on fill, they have to pay for taking liquidity to hedge in the underlying. In the meantime, all options are going to penny spreads. This is a situation that does not end well for equity option MMs. [The situation is more complex. MMs can negotiate with the FCM on taking liquidity on ECNs, etc, but this is usually not done to the smaller MMs.] Ideally, the payment for order flow where equity option MMs have to pay for flow should be inverted so they get PFOF. If that is not happening, at least give the PFOF to the customer. The broker has no right to this. Raise the comission if need be. My daughter and I split desserts when we go out. We both love Tiramisu from the Olive Garden. The rule is, one of us gets to cut, but then the other gets to choose the piece. This ensures fairness. The situation in equity options markets is, brokers cut the cake, and chooses the piece.