Payment for Order Flow
From ACT Wiki
Financial conduct.
(PFOF).
Payment for order flow is defined by the UK Financial Conduct Authority (FCA) in FG12/13 [1], originally issued by the former FSA, as an arrangement whereby a retail broker receives payment from wholesale market makers, in exchange for sending clients' orders to them.
The FCA sees such arrangements (whatever called) as creating potential conflict of interest and pressing against best execution of orders for clients and, accordingly, compromising observation of its best execution rule.
More generally, such payments may fall foul of the rules against "inducements" reflected both in the FCA's regulations and MiFID.
