Complete PFOF Prohibition
Some advocates — and the regulators in the UK, EU, and Canada — have proposed simply prohibiting PFOF. Under this approach, brokers could not accept payments for routing orders to market makers. This would eliminate the conflict of interest at its source but would require brokers to find alternative revenue sources and might change the economics of commission-free trading.
Order Competition Rules
The SEC's 2022 proposal for an order competition rule would have required retail orders to be exposed to competing market makers in transparent auctions before routing to a PFOF recipient. The goal was to use competitive processes to improve execution quality without outright banning PFOF. Critics called this approach complex and potentially disruptive; supporters called it a meaningful middle ground.
Enhanced Disclosure Requirements
Some propose improving disclosure requirements — requiring clearer, simpler communication to retail investors about whether PFOF is received and what execution quality they are receiving. This approach maintains the existing system while improving transparency. Critics argue that disclosure is insufficient given the average retail investor's limited ability to use complex execution quality data.
Best Execution Safe Harbors and Standards
Another approach is strengthening best execution standards — requiring brokers to demonstrate through documented analysis that their PFOF routing arrangements actually deliver best execution. This would increase accountability without necessarily changing the PFOF structure. FINRA and SEC rulemaking in this area has been discussed but not fully implemented.