Agreed. If this is happening it would be a clear conflict of interest. Another issue with PFOF is whether the trades are anonymized or if each trade has a user ID associated with it. Imagine the potential for abuse if all trades are labeled that way.
The have tiers associated with the flow. They don’t know the individual clients but they know if they are toxic or not. With RH and TDA they are obviously all non-toxic. Only talking about equities, but I am sure options even worse.
well yeah, that's unfortunately how MM's make money when triggering stops I guess the question is does the broker hold the order until or leave it resting with the market maker And for the traders, what are the overall benefits 1.) do you leave limit orders and benefit from commission free trading 2.) or are you better off going direct to exchange order book you are kind of damned if you do or damned if you don't because even on the exchange, the bigger players can see the charts and know where most of stop clusters are and then you have algos fishing for the same liquidity vs have slippage with a market maker but comission free trading I don't use stops anyway, so it's never been a subjec that bothered me
https://www.ft.com/content/dc3f8fb5-62e7-4774-98bb-28db801589ee Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found here. https://www.ft.com/content/dc3f8fb5-62e7-4774-98bb-28db801589ee US regulator fines Citadel Securities over trading breach Market-maker traded ahead of customer over-the-counter orders over 2-year period Citadel Securities was fined $700,000 after it removed hundreds of thousands of large OTC orders from its automated trading processes, according to Finra. © Bloomberg Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Richard Henderson in Melbourne JULY 20 2020 29 Print this page The US financial industry regulator has fined Citadel Securities $700,000 for trading ahead of customer orders, dealing a blow to the market-making firm that has benefited from a big rise in retail trading this year. Chicago-based Citadel Securities delayed certain equity orders from clients to buy or sell shares while continuing to trade the same stocks in its own account, as part of its market-making activities, Finra said. The claims relate to “over the counter” equity trades, which are carried out away from public stock exchanges and then reported to regulators. Over a two-year period until September 2014, the market-maker removed hundreds of thousands of large OTC orders from its automated trading processes, according to Finra. That rendered the orders “inactive” and so they had to be handled manually by human traders. Citadel Securities then “traded for its own account on the same side of the market at prices that would have satisfied the orders,” without immediately filling the inactive orders at the same or better prices as required by Finra rules, the regulator said. In February 2014, a sample month reviewed by Finra, the market-maker traded ahead in nearly three-quarters of the inactive orders. “Based on this review, in 559 instances, Citadel Securities traded ahead of 415 inactive OTC customer orders,” the regulator said. Citadel Securities will pay a fine of $700,000 under the terms of a settlement with the regulator without admitting or denying the claims. The company is also required to make whole any customers affected. Recommended The Long ViewMichael Mackenzie The coming earnings season could bring lofty stocks down to earth In a statement to the FT, Citadel Securities said: “We have addressed all of Finra’s concerns and take very seriously our obligations to comply fully with its rules. The issue relates to a limited number of manually handled orders, most of which occurred in 2012-2014.” Citadel Securities is majority-owned by Ken Griffin, the billionaire investor, and is the sister firm to Citadel, the hedge fund he runs. The company is the biggest US retail market-maker with a 40 per cent share and has emerged as one of the big winners from the boom in retail investing through the pandemic. The company makes money from the difference between orders to buy and sell a stock, known as the spread, and buys up orders from the big retail trading platforms including Charles Schwab and Robinhood that have attracted record numbers of new customers this year. Finra also said Citadel Securities fell short of supervisory requirements and failed to display certain OTC customers’ limit orders: instructions to buy or sell at a specific price, or better. Nearly half of the 467 limit orders reviewed by the regulator in the six years until September 2018 were found to violate Finra’s requirements to display orders. The bulk of the violations were for failing to execute trades against existing quotations in a timely manner, Finra said. The regulator also highlighted the ability for traders on Citadel Securities’ OTC desk to “disable” the system component that automatically sent certain messages to trade OTC stocks.
I read about this recently on Zerohedge. They threatened to sue ZH for tweeting about them doing it, saying that practice would be illegal. Then ZH wrote an article exposing how Finra had just fined them for doing exactly that.
%% WELL since stops have to be seen to get hit; that can be a good thing also. Monthly hi/month low...……….= all that stuff is figured in, like a fox knows what a henhouse is But most every thing likes to eat chicken, ask colonel Sanders/KFC/Chick Fillet/MCD. LOL/true
Wonder if KFC is public (omg, what a noob - i know ....) I like how P.Lynch made a joke about Donkey Donuts in 1994 or so ~ : ,,People buy this garbage all the time, and they don't understand it. (some tech company back in the day) I buy simple stocks that is easy to understand, like D.Donuts.When recession hits, i can always visit them & whenever i do, they're full of people. Don't have to worry about low price imports from South Korea'' During the march lows, i went into MCD. In the middle of the week, random day + quarantine, and by 10 am, they already had + 100 orders, while the shares went down 70%~ or so.
%% They're part of the YUM empire; Taco Bell/KFC/Pizza Hut You may remember their slogan =''finger lickin' good'' LOL Donkey doughnuts or dunkin donuts??
Thought so. Don't remember add tho, not US citizen. Timestamped : Damn, always heard it as if it were Donkey Donuts. There is such a company tho, making deserts for horses (heh) : https://www.donkeydonuts.co.uk/