Educational only, not financial advice. Market rules and thresholds can change — verify current specifics with the exchanges or your broker.
Payment for order flow (PFOF) is when a broker routes your orders to a market maker in exchange for payment — the model that funds “commission-free” trading. It’s worth understanding what you’re actually trading for “free.”
How PFOF works
When you place an order at a commission-free broker, it may route the order to a wholesale market maker who pays the broker a small amount for that flow. The market maker fills your order (often at or better than the NBBO, sometimes with price improvement) and profits from the spread. The broker earns from the payment instead of a commission — hence “free.”
The honest debate
PFOF is controversial. Critics argue it creates a conflict (the broker routes for its payment, not necessarily your best fill) and that “free” obscures a cost. Defenders note retail often does get NBBO-or-better fills and price improvement, and that it democratized cheap access. The truth is nuanced: for small, liquid orders the fills are usually fine; for a high-frequency scalper, execution quality (not just zero commission) is what matters.
“Commission-free” means someone else is paying your broker for your orders. Not necessarily bad — but not free, and worth understanding.
What it means for a scalper
For frequent scalping, total execution quality (spread, slippage, fills) matters more than the commission line. PFOF funds the free model; just don’t assume “free” means “best execution.” It connects to the NBBO and price improvement that determine your real fill.