Payment for Order Flow (PFOF)
Broker compensation for routing orders to market makers
What is Payment for Order Flow (PFOF)?
Payment for Order Flow (PFOF) The practice where brokers receive compensation from market makers for routing customer orders to them. Common in commission-free brokerages. In options, PFOF can result in slightly wider effective spreads or slower fills compared to direct exchange routing. Understanding PFOF helps traders evaluate true execution costs.
Complete Definition
The practice where brokers receive compensation from market makers for routing customer orders to them. Common in commission-free brokerages. In options, PFOF can result in slightly wider effective spreads or slower fills compared to direct exchange routing. Understanding PFOF helps traders evaluate true execution costs.
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