How Wall Street Firms Make Billions Off Retail Trades

Payment for order flow (PIFA) is a key component of zero-fee trading, where brokerages like Etrade and Robin Hood direct orders to market makers such as Citadel Securities in exchange for fees. This practice, which generated $3 billion in 2020, has been criticized for its close ties to Wall Street but also credited with saving retail traders money. Despite scrutiny, PIFA has facilitated access to stock markets for new traders.

What is payment for order flow and how does it relate to zero fee trading?

How do brokerages like Etrade and Robin Hood benefit from directing orders to market makers?

What impact did payment for order flow have on retail traders according to Bloomberg intelligence analyst Larry Tab?

What are the criticisms surrounding the relationship between Robin Hood and Wall Street?

Discuss the potential future of payment for order flow in the context of regulatory scrutiny.