Explainer-Robinhood makes most of its money from PFOF. What is it?

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By John McCrank
NEW YORK (Reuters) - App-based retail brokerage Robinhood Markets Inc was set to make its highly anticipated market debut on the Nasdaq on Thursday.
The brokerage, known for helping pioneer commission-free trading, relied on a controversial practice called payment for order flow (PFOF) for more than three-quarters of its revenue https://ift.tt/2SILkuE in the first quarter.
The U.S. Securities and Exchange Commission is now scrutinizing PFOF over conflicts of interest it says are inherent in the practice.
WHAT IS PFOF?
Retail brokerages send the majority of their customers' orders to wholesale brokers, rather than to exchanges, because wholesalers generally execute the orders at a slightly better price than available on exchanges. Most retail brokers ...


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