The 1990s: Disclosure Rather Than Prohibition
During the 1990s, the SEC examined PFOF and chose a disclosure-based approach rather than prohibition. This foundational choice — establishing Rule 606 disclosures instead of banning the practice — set the framework that persists today. The SEC's decision was influenced by arguments that PFOF enabled commission-free trading and that disclosure was sufficient protection.
The 2000s and 2010s: Incremental Reforms
Successive SEC chairs made incremental reforms to market structure — Regulation NMS in 2005, updates to Rule 605/606, market data infrastructure improvements — without fundamentally challenging the PFOF model. Market makers including Citadel Securities grew substantially during this period, benefiting from the permissive regulatory environment.
Chair Gensler and Reform Momentum (2021–2024)
SEC Chair Gary Gensler, appointed in 2021, pursued the most significant market structure reform agenda in decades, including the 2022 proposal package. Gensler publicly questioned PFOF and its effects on retail investors. The 2022 proposals represented the peak of reform momentum. Gensler left the SEC in January 2025.
The Current Environment
As of 2025, the SEC is operating under new leadership. The fate of the Gensler-era reform proposals under new leadership is part of the ongoing story of market structure reform. The Ethics Reporter will continue to cover regulatory developments as they occur.