We may receive financial compensation from these third parties. Please be aware that some of the links on this site will direct you to the websites of third parties, some of whom are marketing affiliates and/or business partners of this site and/or its owners, operators and affiliates. When confirming a trade, the broker must also disclose whether they received payment for order flow and allow the investor to request the details of the transaction. Securities and Exchange Commission regulations require brokers to inform their clients if they receive payment for order flow and detail the fees they collect in this process. This allows them to capture this spread while reducing risk.
Third parties, such as market makers and securities exchanges, will pay this fee because they are able to aggregate orders and due to the scale of their trades can buy at the bid prices and sell at offer. The third party fulfills on the obligation to find the most favorable terms for the investor.The broker routes the trade to a third party, and collects a fee for providing them with the order.An investor contacts their broker to execute a trade this includes both buying as well as selling a stock.Payment for order flow aligns with this duty and can be summarized into three steps: This requirement mandates a broker to seek out the most favorable terms of execution reasonably available to their clients, including securing the best possible price. The duty of best execution is a requirement under the jurisdiction of the Securities and Exchange Commission (SEC).
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