Robinhood dodged a major blow to its business model following a vote by the House Financial Services Committee that resulted in the quiet shelving of an initial legislative effort to ban a practice known as “payment for order flow,” FOX Business has learned.
Payment for order flow (PFOF) is a practice in which discount brokers sell their customers’ buy and sell orders to third-party brokerages like Citadel and Virtu Financial. It allows firms like Robinhood, Charles Schwab Co., and ETrade to offer commission-free or low-fee trading to investors.
But the practice is not without its critics, including Gary Gensler, chairman of the Securities and Exchange Commission, who has said PFOF could lead to abuses such as not providing customers with the best price execution.
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