Is Payment For Order Flow Bad?

There are some brokerages which promotes the detail that they don’t take payment for order flow. Together with highlighting that market makers actually compete to get their orders.

But the  proponents of payment for order flow argue that the payments which they receive from market makers enables them to keep these trading costs down for retail investors.

However brokers which doesn’t  take payment for order flow argue that client trades will be executed at much better prices because of the broker routes the trade based on the best available price.

The critics of the payment for order flow system claim that it can sooner or later become a conflict of interest for brokers.Which in the end may route trades to a market maker that pays them the most, even if it means a worse execution price for the trader.

The whole bottom line here is that if the execution price is a concern for you. Just be sure to look into the quality of a broker’s execution before diving in. 

However if you are newbie in the investing field and you make plans to trade that often and for the most part you’re focused on long-term returns, execution price shouldn’t be much of a concern.

You Can Find My Investing Portfolio Here

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s