What is Payment for Order Flow (PFOF)?

PFOF is the compensation that broker dealers receive for directing customer order flow to particular exchanges or market makers. An SEC rule has defined payment for order flow to "include any payment or  benefit that results in compensation to the broker-dealer for routing  orders to a particular venue." The payments typically amount to a few pennies per share.

This practice is legal, providing both parties ensure the best execution and that they provide customers certain information regarding the compensation relationship. PFOF is carefully regulated by the SEC.

Here at etoro, our broker-dealer (etoro Securities USA Inc) sends your stock orders to our clearing firm (Apex Clearing Corporation), which then routes them to market centers for execution seeking the best available price. Apex and etoro share any PFOF received from those market centers resulting from this process. You can find details about this process and those amounts here.

PFOF is one of the ways etoro makes money in the US. Learn more here.