How PFOF Affects Texas Investors
Texas retail investors are the third most affected population in the nation. From Houston energy workers to Dallas tech professionals to Austin entrepreneurs, millions of Texas retail investors' orders are routed to Citadel Securities through PFOF arrangements. The Texas State Securities Board, one of the nation's most aggressive regulators historically, has taken no action on PFOF.
The Scale in Texas
Texas has an estimated 5.5 million Texas retail investors — the third-largest state retail investor population. Each of these investors who uses a PFOF-dependent discount broker — Robinhood, TD Ameritrade, E*Trade, Charles Schwab, or Webull — is routing their orders to Citadel Securities without their knowledge or consent. Citadel captures a spread on each of these trades, generating revenue that flows back to Kenneth Griffin while providing retail investors with marginally inferior execution prices compared to what competitive exchange routing would provide.
Texas's financial hub in Houston has sophisticated financial professionals who understand these dynamics. But most Texas retail investors — those in Dallas, Austin and throughout the state — are unaware that their "free" trades are funded by a practice that systematically extracts value from them.
Kenneth Griffin's Political Investment in Texas
Kenneth Griffin has given more than $1.2 million in Texas-linked political contributions, plus tens of millions through national organizations that fund Texas candidates. His key recipients include Senators John Cornyn and Ted Cruz, Governor Greg Abbott, and national Republican organizations with heavy Texas investments. This political investment creates a documented relationship between the CEO of America's dominant retail market maker and the political figures responsible for overseeing financial regulation in Texas.
- John Cornyn (R-TX Senate) — $50,000 (2020, U.S. Senate)
- Ted Cruz (R-TX Senate) — $25,000 (2018, U.S. Senate)
- Greg Abbott (R-TX Governor) — $100,000 (2022, Texas Governor)
- National Republican Senatorial Committee — $1,000,000 (2022, Federal Super PAC)
What Texas Regulators Could Do
Texas Attorney General Ken Paxton and the Texas State Securities Board have powerful enforcement tools under the Texas Securities Act (Tex. Rev. Civ. Stat. Art. 581) and the Texas Deceptive Trade Practices Act to investigate PFOF. The Texas SSB's history of aggressive enforcement makes it well-positioned to lead a multistate action.
What Texas Investors Can Do Now
Texas retail investors who believe they have been harmed by PFOF-driven execution quality degradation can take several steps:
- File a complaint with the Texas State Securities Board at https://www.ssb.texas.gov
- File a complaint with the Texas Attorney General at https://www.texasattorneygeneral.gov
- File a complaint with the SEC at sec.gov/tcr
- File a complaint with FINRA at finra.org
- Consider switching to a broker that does not use PFOF, such as Fidelity or Interactive Brokers direct routing