<i>PAYMENT-FOR-ORDER-FLOW IS GOOD FOR YOU</i>. There, I said it. [Source: I have 10 years of HFT / market making experience]<p>PFOF is misunderstood, as others pointed out here. However, it's not a 'win win win'; it's more like a 'win win lose'. This is something even media gets wrong <i>all</i> the time. I've only seen this mentioned as a footnote in Matt Levine.<p>[Note: I don't know if Double is doing it, or if they plan to - this is just a general summary].<p>So:<p>* Win: Citadel (etc.) make money by trading against order flow that's more benign than the resting orders in public exchanges.<p>* Win: The client gets a better execution price than the publicly displayed bid/ask. Back when I started (20+ years ago, yes, I'm old) this was 1/100 of a penny, the legal minimum (due to minimum tick print size). But recently, the market orders in my personal account have been getting price improvement of almost half the spread.<p>Things are a bit different in some <i>options</i> exchanges, where retail flow gets some priority, regardless of when you joined a given price point at the order book queue. But almost all equity exchanges use price-time priority, you're almost guaranteed adverse selection.<p>Example for those who may need it: if you place a buy limit @ $1.07 in a 1.07 (bid) - 1.08 (ask) market. Then, the bids at 1.07 slowly disappear, because firms such as "Shark Holdings, LLC" (the trading firm consisting solely of quants with unpronounceable foreign-sounding names) will cancel their bids if they sense the market is going down, e.g. if they observe a lot of trades at the bid. Then, the new market will be 1.06-1.07, and you will have sold at the ask.<p>OK, so here's who <i>loses</i>: any large orders that have to trade in the open markets (not 'dark pools', ATS, etc.) will be stuck with more 'toxic' orders, and get worse execution. The question is: do I gain more as an <i>individual</i> from having my (quasi-entertainment-value, usually small) personal account orders get better execution? or do I lose more by having my <i>indirect</i> trading (possibly an index fund that I hold my retirement money in) get worse execution? I think it's the latter. But nobody connects the dots and/or seems to care. [Of course, this is more complicated, because large institutional orders aren't 100% on behalf of small investors.]<p>You may say this component of market structure is stupid/wrong/suboptimal. I personally think so. But this is the reality of it. It's encased in rules. There was some attempt to get rid of PFOF a couple of years ago, but it failed. So that's not going away.<p>So this is a win-win-lose: it's globally suboptimal, but for the 2 first 'wins', it's locally optimal.<p>Summary: although PFOF has bad optics and stimulates pitchfork-y instincts ("big bad evil companies are out to gitcha", etc.), if your broker doesn't do it, you're both leaving money on the table - and guess what, they'd have to charge you some other way.