Knowing the way the SEC operates, it will exact a pound of flesh from PFOF, while allowing the practice to continue.
Ok so how those PFOF brokers make money is that they lose on making markets on stocks where the spread is thin and then make up the losses ten times over with other assets like options? Is that how it is? Peterffy does not own exchanges anymore. That would be trading against his clients, the traders.
He probably got "talked to". You never who is behind those PFOF brokers. Nevertheless I will be interested to read the full report too.
I was referring to options as this is the subject of this thread. Peterffy may not be owning exchange (although he owns part of some option exchanges...yes, that's legit!!!), but he used to own a very profitable MM firm (before the penny pilot program).
SEC, it looks like they will tweak PFOF. That is what I would like to see. Not a full ban, just more transparency...Less pocketing of orders. From Bloomberg... The US Securities and Exchange Commission will stop short of banning payment for order flow, a controversial way to process retail stock trades, as it proposes new rules for the $48 trillion American equities market. The decision, described by people familiar with the matter, follows months of internal deliberations at the agency. It marks a win for brokerages that get paid for processing rights, although the SEC may still enact other changes that make the practice less profitable, according to the people. The regulator is expected to unveil its plans in the coming months. The Charles Schwab Corporation (SCHW) 72.06-0.86 (-1.17%) Day's Range 71.61 - 74.17 The news didn't really spook Schwab.
Schwab is highly diversified. It is integrating Tdameritrade into its operation which will lead to billions in savings. Is margin rates are among the highest on the street. With interest rates rises they will be minting money. Instead of focus on PFOF the SEC should have focused on collusion between brokerage firms to keep margin interest rates at a high levels while paying their customers negligible interest on their credit balances. Again we are talking hundred of millions. Compare the margin rates at Interactive vs. the rest of the industry. Schwab was hit recently with with a record 187million fine and the stock price didn't even blink.
Yes I know and then he sold it citing "conflict of interest" but the main reason I suspect is because he was actually losing money (unless you have examined its financial statements) because it's really non-PFOF. I can tell you this because I traded options before and after the selling of the options exchange, both the execution speed and the price deteriorated after the disappearance of this option exchange. PFOF benefits no one except the MM themselves.
Yeah I can accept that. What we traders want is choices, informed choices for us to decide whether we want to trade with PFOF or non-PFOF brokers and we can't make our choice without knowing how much we are saving (supposedly) from PFOF brokers and how much we are losing (gaining) in terms of trade prices and execution quality. More transparency is a good start; it would allow us to compare apples to apples and see exactly how everything is. I hope the information that they provide is useful and truthful. Specifically I want to see the ACTUAL not would've been price improvement that they really gave to traders, the execution time for every single trade (not cherry pick the trades that they gave the most price improvement) that they executed vs. the time a trade is executed by the exchange for the same trade that's received by the exchange and the NBBO price vs. the price that they ACTUALLY gave at each of these execution time.
Yeah but that's each broker's private business decision. They have the right to charge whatever margin interest rate they want and they are not even obligated to pay interest on credit balance. Plenty of brokers don't pay interest on idle cash balances at all. This is where we traders vote with our wallets. We don't like the shitty interest rates that they charge/pay, we close our account and go somewhere else. IB actually pays pretty decent interest rate right now on idle cash balances if anybody's got some idle cash and wants to earn some interest. https://www.interactivebrokers.com/en/home.php