He discussed implementing an auction structure for clearing, similar to a model that exists in the options market.

Citadel Securities is a sister company to Citadel LLC, a hedge fund that had to spend billions to bail out peer firms that were collapsing as GameStop (NYSE: GME) shares skyrocketed.Īpex Clearing Corporation Gets Ahead of the Curve, Announces PFOF AlternativeĮarlier in the week, Securities and Exchange Commission (SEC) Chair Gary Gensler talked about the SEC’s interest in curbing PFOF. After Robinhood froze trading of certain stocks that many hedge funds were shorting, some accused the company of bending its knee to Citadel Securities. PFOF is coming under intense scrutiny especially following the controversies surrounding the meme-stock boom of early 2021. A significant portion of Robinhood’s revenue comes solely from PFOF. These critics call the model a kickback for brokerages as well, and they have reason to label it as such. Market makers can execute trades in a way that nets more of a profit for them, rather than executing them in a way that minimizes the bid-ask spread for retail investors. PFOF skeptics argue that the practice violates “best execution” requirements enforced by the Financial Industry Regulatory Authority (FINRA). While revolutionary in the grand scheme of retail investing, PFOF is quite controversial. Since the company launched its platform, other companies have also implemented PFOF to keep their market share intact. Robinhood (NASDAQ: HOOD) ended up changing the entire e-trading industry by implementing PFOF and creating fee-free retail trading.

Those market makers then take the trades to a clearing house and return the proceeds. The model involves brokerages selling trades in bulk to market makers. PFOF has been a hot topic of debate over the last two years.

Thanks to its impressive senses, it now stands to lead a broad shift toward a new method of clearing trades. The clearing firm has apparently been reading the writing on the wall for some time now. Apex Clearing Corporation is readying itself for a crackdown on payment for order flow (PFOF).

Apex clearing vs securities robinhood