Brokerages jump on report SEC stops short of banning PFOF deals

The brand of Robinhood Markets, Inc. is seen at a pop-up occasion on Wall Avenue after the corporate’s IPO in New York Metropolis, U.S., July 29, 2021. REUTERS/Andrew Kelly

Sept 22 (Reuters) – Shares of retail brokerage Robinhood Markets Inc and market maker Virtu Monetary (VIRT.O) jumped following a media report that the U.S. Securities and Trade Fee (SEC) will cease wanting banning payment-for-order-flow (PFOF).

The SEC should enact different adjustments that make the apply much less worthwhile, Bloomberg Information reported on Thursday, citing folks acquainted with the matter. The regulator had mulled over the controversial apply for months that critics imagine creates conflicts of curiosity. (https://bit.ly/3LwinJn)

Retail brokers route most buyer orders by way of wholesale brokers than exchanges, as wholesalers typically supply a barely higher worth. Most retail brokers additionally settle for rebates, or funds, from wholesalers in lieu of orders. learn extra

Shares of Robinhood Markets Inc , which makes round 75% of its income from PFOF, climbed 5%, whereas Virtu Monetary (VIRT.O) added 9%.

PFOF drew new scrutiny final 12 months when a military of retail traders went on a shopping for spree of “meme shares” like GameStop (GME.N) and AMC (AMC.N), squeezing hedge funds that had shorted the shares.

Many traders had bought the shares utilizing commission-free brokers like Robinhood that settle for PFOF from a couple of highly effective market-makers.

Britain, Canada, and Australia have already banned PFOF, whereas SEC Chairman Gary Gensler had prompt in August that the regulator may go that route.

Chair Gensler stated in his current Congressional testimony that he believes it is acceptable to have a look at methods to clean up the SEC’s guidelines to make fairness markets truthful, environment friendly, and aggressive as attainable for traders, significantly for retail traders, stated an SEC spokesperson.

To that finish, suggestions about greatest execution, charges and rebates, fee for order circulation and order-by-order competitors are few of the issues being thought of, the spokesperson added.

Reporting by Mehnaz Yasmin and Medha Singh in Bengaluru; Enhancing by Uttaresh.V and Shailesh Kuber

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