Inspired by the $MCDX de-pegging on Gate, write a popular science article about PFOF.



What is PFOF

PFOF (Payment for Order Flow) is a business model where brokers package and sell customer trade orders to market makers, who profit from the bid-ask spread and pay brokers a commission per order.

Core logic:
1. Brokers attract retail trading by replacing commission income with rebates, achieving "zero-commission trading."
2. Market Maker Motivation: Acquire retail order flow and earn spreads through high-frequency hedging.

Core Advantages:
1. Low trading costs: low commissions, costs are passed on to market makers.
2. Advantage of Transaction Price: Market makers have internal matching, and the final transaction slippage is less than the exchange slippage.
3. Depth Advantage: Market makers directly connect with exchanges and conduct internal matching trades, with trading depth greater than or equal to that of the exchange.

Conflict of Interest: Brokers may prioritize routing orders to market makers with higher bids for the sake of obtaining higher commissions, rather than to exchanges that provide the best execution prices.
MCDX-0.22%
ORDER-4.38%
FLOW-2.86%
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Musti3507vip
· 07-09 10:08
Bull Run 🐂
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