SEC Rule 606: The Disclosure You Never Read
SEC Rule 606 requires brokers to publish quarterly reports disclosing where they route customer orders and what payments they receive for that routing. These reports are public — but they are dense, technical documents buried in broker websites. The average retail investor has never read one. Robinhood's Rule 606 disclosures, for example, reveal that Citadel Securities receives the overwhelming majority of its equity order flow.
What Your Broker's 606 Report Shows
If you access your broker's Rule 606 report, you will typically find that between 40% and 90% of your equity orders go to Citadel Securities. The remaining portion is split between other wholesale market makers like Virtu Financial. Your broker will also disclose the per-share payment it receives from Citadel. What it will not show you is whether you received the best possible execution price — because that calculation is buried in Rule 605 execution quality reports that are even less readable.
The Best Execution Standard
FINRA Rule 5310 requires brokers to seek the most favorable terms reasonably available for customer orders — a standard called 'best execution.' However, the rule has significant weaknesses: it allows brokers to use price improvement as the primary metric while ignoring other execution quality factors, and it does not require brokers to shop orders across multiple venues before routing to a PFOF recipient.
The Reform Debate
The SEC's 2023 market structure reform proposals would have required 'order competition' — forcing brokers to auction retail orders among multiple market makers before execution. The proposal was intended to end Citadel's effective monopoly on retail order flow. Citadel Securities lobbied aggressively against the reforms. The proposals were subsequently weakened and their implementation timeline stretched — in a regulatory environment where Citadel's political connections are conspicuously relevant.