The Price Improvement Argument
Citadel Securities and PFOF defenders argue that the firm consistently provides retail investors with price improvement — execution at prices better than the NBBO. They point to Rule 605 statistics showing that a high percentage of Citadel's executed orders received price improvement, and argue that this directly benefits retail investors more than any plausible alternative routing arrangement.
The Zero-Commission Argument
Defenders argue that PFOF enables commission-free trading, which has dramatically expanded retail investor participation. Before zero-commission trading, many small investors faced $7–10 commissions per trade that made frequent trading economically irrational. PFOF's critics, defenders argue, would effectively impose commissions back on retail investors in exchange for theoretical execution quality improvements that may not materialize.
The Liquidity Argument
Market makers including Citadel Securities argue that their participation provides critical liquidity — ensuring that retail investors can buy or sell at any time. The 2010 Flash Crash demonstrated what can happen when liquidity providers withdraw from markets. Wholesale market makers, defenders argue, provide more consistent liquidity than alternative mechanisms.
The Empirical Debate
The empirical evidence on whether PFOF harms retail investors is genuinely contested. Some studies find significant harm; others find minimal effects or even benefits for small retail trades. Citadel Securities has funded research and published analyses supporting the view that its execution quality benefits retail investors. Independent researchers have challenged these analyses, and the debate continues in academic and policy circles.