The Zero-Commission Transition
In October 2019, Charles Schwab announced elimination of equity trading commissions, triggering an industry-wide move to zero commissions. TD Ameritrade, E*Trade, and others quickly followed. This transition increased brokers' reliance on PFOF revenue to replace lost commission income — effectively transferring the source of broker revenue from visible commissions to invisible PFOF.
Schwab's PFOF Disclosures
Charles Schwab's Rule 606 disclosures show PFOF receipts from market makers including Citadel Securities. Schwab has publicly described its routing practices and PFOF arrangements. Following Schwab's acquisition of TD Ameritrade, the combined entity became one of the largest PFOF recipients in the industry by trading volume.
Execution Quality Comparisons
Academic and industry studies have examined execution quality differences across brokers. Brokers that receive less PFOF or offer direct routing sometimes achieve better execution quality on average. Investors can compare broker execution quality using Rule 605 data published monthly by market makers and aggregated by third-party services.
Choosing Among Brokers
The choice of broker affects not just commissions but also execution quality, account features, research access, and customer service. Investors who prioritize execution quality — particularly frequent traders — may benefit from comparing brokers' Rule 606 and 605 statistics before making a broker selection.