Home Business What Gary Gensler Really Meant With His Order Flow Remarks

What Gary Gensler Really Meant With His Order Flow Remarks

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In payment for order flow, a retail broker sends customer orders to a market maker such as Citadel Securities or Virtu Financial Inc. These firms match buy and sell orders at prices within the quoted market spreads. So if a stock is bid at $49.95 and offered at $50.05, the market maker might fill a sell order at $49.97, a buy order at $50.03 and make a profit of six cents. (These are hypothetical numbers.) Both the retail buyer and retail seller get better prices than market orders sent to an exchange. The market maker then sends payment, say two cents per share, to the retail broker. This allows retail brokers to charge zero commissions.

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