The Robinhood-Citadel PFOF Relationship
Robinhood is the most prominent PFOF-dependent broker, having built its entire business model on zero-commission trading funded by payments from Citadel Securities. In 2020, Robinhood received approximately $1.5 billion in PFOF — the majority from Citadel. In 2020, the SEC charged and fined Robinhood $65 million for failing to disclose PFOF conflicts and achieving inferior execution.
The Financial Scale
In 2020, Robinhood received approximately $1.5 billion in payment for order flow. This payment came primarily from Citadel Securities in exchange for routing Robinhood customers' equity orders to Citadel for execution. Citadel paid this amount because it expected to extract significantly more value from executing Robinhood's customers' orders — through spread capture — than it paid for the order flow. The difference represents value extracted from Robinhood customers through execution quality degradation.
Regulatory Actions
SEC settlement $65M (2020); Massachusetts $7.5M settlement (2020); FINRA $70M settlement (2021). PFOF arrangements continue.
What Robinhood Customers Should Know
Robinhood customers can find out how their orders are routed by accessing the broker's SEC Rule 606 quarterly report, typically available in the "Legal Disclosures" or "About" section of the broker's website. For investors concerned about PFOF, alternative brokers that route to exchanges directly — including Fidelity (for equity orders) and Interactive Brokers (with direct routing option) — are available.