PFOF is not anti-competitive and more costly. Brokerage firms compete for business with different business models. People are not abandoning Schwab for Interactive Brokers and visa versa.
Citadel, NYSE, Schwab Fire Salvo at SEC On Trading Overhaul
- Thread starter ETJ
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Hard to have a conversation if you don't respond to the actual arguments that I'm making.
For the third time, the argument is not whether you are getting a better deal today with Schwab or with IB. It's about which market structure leads to lower costs. Do you understand the difference? Both IB and Schwab exist in a world where PFOF exists, so comparing them is irrelevant to what we are talking about. The SEC proposal is talking about creating a world where PFOF does not exist or does not apply to most retail orders.
The fact that PFOF is anti competitive is straightforward. They are literally buying exclusive market share from brokers in a business where it's all about scale. How do you compete with that? You can't because you can't even interact with the flow. To "compete" you would need to raise mega billions and try to achieve the scale without organic any growth.. it makes no sense and is clearly impossible.
Even Citadel themselves have literally said that it is anticompetitive: https://www.sec.gov/rules/concept/s70704/citadel04132004.pdf . If you don't believe your PFOF buddies I don't know what to tell you.
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TRUE;
but PFOF is in no way like a cartel OPEC.
Actually PFOF is a much smaller market than Brent\ black gold/TX TEA
\Most likely works out well;
SEC did with wisdom , recently lower thier own fees\ would to God all govs would do that
Exactly. The argument that people aren't switching from Schwab to IB is nonsensical as most retail traders don't have any idea about the market microstructure, nor should they.
Even the people on r/wallstreetbets who aren't the absolute most unknowledgeable of retail traders don't understand how PFOF works.
Since I can only think in analogies, it's like if you bought a car that had faulty engine valves from the factory and then blaming the consumer for not knowing any better.
Citadel Securities is distinct from the above Citadel Group and occupy the top spot for PFOF;
https://www.thetradenews.com/citade...nt-for-order-flow-and-most-of-its-on-options/
I agree with you, but the argument is actually even stronger than that.
zdreg is claiming that IB < Schwab.
Now I don't know if that is really true but even if it is, he is still wrong to oppose the proposal. Because the reality could be something like:
IB (current) < Schwab (current) < IB (SEC proposal) < Schwab (SEC proposal).
The case for competitive auctions beating internalization is pretty trivial to make.
They are related companies with the same founder and owner. So the irony of Citadel criticizing PFOF is real, not just a coincidence of some unrelated firm with a similar name.
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THAT's a common pattern ,TheDawn;
wide bid/ ask on low or lower volume.
I paid more> than average 6-7% bid -ask, on lower volume REALTY, nice the interest rates were higher but demand + price was much better for sells + buys.
May have hurt the liquidity a bit more, when IBKR got out of that market, as a market maker.
That maybe seem a bit strange with Citadel ''fine with no order flow''
But looks like with his business plan, sounds like he does not need PFOF to prosper.
Good thing for me i was never dependent on a great execution for trend profit.
For those that do make their money with good executions;
must be tough to be in markets with VIRT only having one losing day in 5 years.
Good idea SEC cutting its fees.
The two have fundamentally different business models. Having ones' hand in all pies (buyside, sellside, market-making side) just delivers more pie.