Brokerage trading practices, payment for order flow under scrutiny (MarketWatch)

Ongoing reviews by regulators and an upcoming Congressional hearing have brokerage firm trading practices under the spotlight. This following the recent GameStop trading frenzy, revealing online broker Robinhood’s reliance on payment for order flow, and raising questions about its actions to restrict trading in Gamestop. Regulators have condoned payment for order flow for many years, explains FrontLine’s Founder and President Amy Lynch, and to abruptly change their stance about it would seem unlikely as it would be challenged in the courts, she further notes. Eliminating the Robinhood type business model, or restricting the use of payment for order flow, would likely need the support of the brokerage industry to make any significant changes to what is currently a widely accepted practice. See MarketWatch, “The SEC could cripple Robinhood’s business model by enforcing existing rules, experts say“