Payment for Order Flow: Difference between revisions

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(PFOF).
(PFOF).


Payment for order flow is defined by the UK [[Financial Conduct Authority]] (FCA) in FG12/13 [http://www.fca.org.uk/your-fca/documents/finalised-guidance/fsa-fg1213], originally issued by the former [[FSA]], as an arrangement whereby a [[broker]] receives payment from [[market maker]]s, in exchange for sending order flow to them.
Payment for order flow is defined by the UK [[Financial Conduct Authority]] (FCA) in FG12/13 [http://www.fca.org.uk/your-fca/documents/finalised-guidance/fsa-fg1213], originally issued by the former [[FSA]], as an arrangement whereby a retail [[broker]] receives payment from wholesale [[market maker]]s, 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.
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 in the European Union, such payments may fall foul of the EU's [[MiFID]] rules on "inducements" reflected in the FCA's Handbook ([[http://fshandbook.info/FS/html/FCA/COBS/2/3]] at 2.3.1).
 
More generally, such payments may fall foul of the rules against "inducements" reflected both in the FCA's regulations and MiFID.





Latest revision as of 01:05, 27 January 2022

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.


See also