PFOF
Business & Finance abbreviation · Stock Market & Investing
| Stands for | Payment for order flow |
|---|---|
| Categories | Business & Finance |
PFOF stands for Payment for order flow, a stock market & investing abbreviation.
Compensation a broker receives from a market maker for routing customer orders to it for execution. PFOF lets brokers such as Robinhood offer commission-free trading but raises questions about conflicts of interest and execution quality.
Example: The broker earned most of its revenue from PFOF on customers' options trades.
Usage notes
The practice was pioneered by Bernard Madoff's market-making firm in the 1980s. The UK banned PFOF in 2012, and the EU has agreed to phase it out. US brokers must disclose their order-routing and PFOF arrangements in quarterly Rule 606 reports.
Related abbreviations
More stock market & investing abbreviations
- OTM – Out of the money
- P/B – Price-to-book ratio
- P/E – Price-to-earnings ratio
- P/S – Price-to-sales ratio
- PDT – Pattern day trader
- PEG – Price/earnings-to-growth ratio
- PT – Price target
- RIA – Registered investment adviser
- RSI – Relative strength index
- S&P 500 – Standard & Poor's 500
- S-1 – Form S-1 (registration statement)
- SEDOL – Stock Exchange Daily Official List