A customer can place a U.S. stock order that shows a $0 commission.
The broker still chooses the venue. A wholesale market maker or an exchange can pay the broker for sending the order there.
The broker may send the order to the venue that pays, even when the customer sees no commission line.
The payment is payment for order flow, shortened to PFOF.
U.S. brokerage accounts are the focus here. The European Union and the United Kingdom limit the same payment more tightly.
How PFOF operates
A broker receives payment for order flow when it routes a customer’s order to a venue that pays for that order.
Order types include market orders and limit orders.
The broker may send the order to a wholesale market maker instead of a public exchange.
The market maker buys at the bid and sells at the ask. The gap between those prices is the bid-ask spread.
FINRA Regulatory Notice 21-23 says the Securities and Exchange Commission defines the payment broadly.
The definition covers cash from a wholesale market maker. It also covers exchange rebates, credits, and fee discounts for routing orders to that exchange.
Robinhood Securities, the clearing broker for Robinhood, set out one cash design in its Q2 2026 Rule 606 report.
Regular-hours equity fills run from 9:30 a.m. to 4:00 p.m. Eastern Time. The payment on those fills is 12.35% of the spread between the national best bid and the national best offer.
From 4:00 a.m. to 9:30 a.m., and from 4:00 p.m. to 8:00 p.m., the share of that spread is 9%. That spread share is the same at each non-exchange market center the firm uses in those hours.
From 8:00 p.m. to 4:00 a.m., the payment is $0.0006 per share.
Robinhood Securities passes 80% of the revenue from these market centers to Robinhood Financial.
On a one-cent spread, the regular-hours rate is $0.001235 per share. A 100-share order at that spread produces $0.1235.
Robinhood Securities attests that the orders are retail when a market center asks.
Charles Schwab uses a flat cap in its Q2 2026 Rule 606 report.
For marketable listed-equity orders the rate is $0.001 per share or less. For non-marketable orders it is $0.0033 per share or less. For extended-hours orders it is $0.0006 per share or less.
Every market maker pays Schwab the same rate for a given order type. A 100-share marketable order at the $0.001 cap pays the broker at most $0.10.
Schwab states that it does not treat the payment as a condition for sending more orders. It also states that it does not negotiate a tradeoff between the payment and price improvement.
Schwab’s Q2 2026 caps are under one cent a share. Robinhood Securities’ daytime rate is a share of the spread, so the dollar amount moves with that spread.
Impact on retail investors
The customer can see a $0 commission while the broker receives a separate payment for order flow.
How commission-free brokers make money covers the other revenue lines, including idle cash, margin, and share lending.
Rule 607 of Regulation NMS requires a written notice when the account opens and once a year after that.
The notice states whether the broker receives payment for order flow and describes the compensation.
It also states how the broker picks a venue when the customer gives no instruction. It describes the extent to which orders can execute at a price better than the national best bid and offer.
FINRA Rule 5310 requires reasonable diligence to find the best market. The price to the customer must be as favorable as possible under prevailing market conditions.
FINRA Regulatory Notice 21-23 says the payment does not, by itself, violate that duty. The same notice says the firm must not let the payment interfere with best execution.
The notice says the payment does not count as a plus when the firm scores market quality. When the firm receives the payment, the possibility of price improvement is a heightened consideration.
The notice also says that simply obtaining the best bid or offer may not satisfy the duty, particularly on a small order.
A $0 commission and a payment for order flow can appear on the same trade. The duty to seek a favorable price remains.
Tradeoffs and market criticisms
The payment can give the broker a reason to prefer the venue that pays more.
The SEC Division of Examinations has said payment for order flow may be a conflict of interest.
A firm may route orders to maximize that revenue, including by using only venues that agree to pay a set amount. That choice can come at the expense of execution quality.
Rule 606 of Regulation NMS requires a public quarterly report on the routing.
The report covers non-directed orders in NMS stocks submitted on a held basis. It also covers non-directed customer orders in listed option contracts.
The broker must post the report within one month after the quarter ends. The broker keeps it on a free website for three years.
The stock section splits S&P 500 names from other NMS stocks. Membership is fixed as of the first day of the quarter.
Options are a separate section.
For each venue, the report shows net payment for order flow as a dollar total and as a per-share amount.
It splits market orders, marketable limit orders, non-marketable limit orders, and other orders.
The report also describes terms that can influence routing. Higher pay for hitting a volume threshold is one term. Lower pay for missing a threshold, tiered schedules, and a minimum amount of flow are others.
FINRA Regulatory Notice 21-23 describes a separate flag on the trade confirmation.
Exchange Act Rule 10b-10 generally requires the confirmation to show when the broker received payment for order flow on that transaction. The source and nature of the compensation are available if the customer asks in writing.
The quarterly report adds up orders across customers. It does not list customer names.
The incentive to maximize the payment is the conflict. The quarterly report and the confirmation flag disclose that payment.
Regulatory and regional status
In the United States, firms may receive payment for order flow. They still have to disclose it and seek best execution.
MiFIR Article 39a bars a fee, commission, or non-monetary benefit from a third party for executing client orders on a particular venue.
The same article bars forwarding those orders to a third party for execution on a particular venue. It applies to retail clients and to a defined set of professional clients.
A member state that already allowed the practice before 28 March 2024 could exempt its firms until 30 June 2026. The exemption applied only to clients in that member state.
Some venue rebates are outside that prohibition. They must follow the venue’s public tariff, go entirely to the client, and not pay the firm.
BaFin Supervisory Statement 05/2026 states that the ban fully entered into force in Germany on 1 July 2026.
In the United Kingdom, the FCA Dear CEO letter of 13 December 2017 covers this payment.
The letter said that continuing to charge it will breach MiFID II standards.
A payment permitted in the United States is prohibited for many clients in the European Union. In the United Kingdom, the FCA letter treats charging it as a breach of MiFID II standards.
Common misconceptions
A $0 commission does not mean the venue paid the broker nothing.
Fidelity Brokerage Services disclosed wholesale payments in its Q2 2026 Rule 606 report.
For marketable equity orders the rate is $0.0008 per share or less. For non-marketable equity orders the rate is $0.003 per share or less.
The report names Citadel Securities and Virtu Americas among the market makers. Fidelity states that the payment is not a condition for sending more orders to a market maker.
The payment is not a separate charge billed to the customer. It is cash from the venue to the broker.
The practice is not limited to app-based brokers. Schwab’s Q2 2026 report and Fidelity’s Q2 2026 report both disclose wholesale market-maker payments.
The public Rule 606 report aggregates orders. It is not a file of customer names.
The confirmation, the annual Rule 607 notice, and the quarterly report are three different documents.
