I know it is possible to brokers to receive payment for order flow on stock options and etf options. But is it possible for brokers to receive payment for order flow on index options (e.g. SPX, NDX and etc)?
Every one will say no, but that's not technically correct. This is one of the shortcomings of the 606. Send me all your index flow - don't divide and I'll pay you more on say Apple or Microsoft options. If I'm an MM I can also trade giving me flow in a cash product in exchange for flow in an index option. I buy all my apple stock from you and you send me all your index option flow - pretty much how payment originated.
@ajacobson For me, it would have been a No. But since you are saying so, I would like to know how it is technically incorrect. Just curious to find out what I am missing.