Analysis

The PFOF Race to the Bottom: How Competition Makes It Worse

Perverse competition in PFOF markets maximizes the wrong variable — payment size, not execution quality.

Perverse Competition

Brokers compete for highest PFOF rates from Citadel. Citadel competes by offering higher payments than Virtu. This drives up payments — revenue for both parties — with zero pressure to improve retail execution quality.

PFOF race to bottomPFOF competition perverse

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