Definition
Payment for Order Flow – A payment a broker receives from a market maker in exchange for routing customer stock/option orders to that market maker for execution, rather than directly to an exchange. Lets a broker offer commission-free trading to customers while still earning revenue on every trade, but it also means the broker's execution-quality incentives depend on which market maker pays the most for its order flow, not necessarily which one gives the customer the best price — the core tension regulators scrutinize this revenue model for. Found In: Income Statement (revenue disaggregation), MD&A