Payment for Order Flow: Who Pays for Your Free Stock Trade?
About this episode
In this episode, Andy explains how brokers make money from free stock trades through payment for order flow and discusses the implications of this practice.
In this episode of Money Lessons, Andy answers a question he has been holding since last year: if your stock trades are free, how does a broker make its money? He explains payment for order flow — the arrangement where your broker sells your order to a wholesale market maker that fills it and pays for the privilege. Andy walks through why your everyday orders are so valuable, where the real conflict of interest hides, and what the 2020 Robinhood settlement revealed about the true cost of "free." The takeaway: free isn't free — and the cost that matters most is the one that tempts you to trade too often. AndrewTemte.com
More episodes of Money Lessons with Andrew Temte, PhD, CFA
- Why International Stocks Belong in Your Portfolio
- The ETF: Trade It Like a Stock, Hold It Like an Index Fund
- What Is "The Market"? The Dow, the S&P 500, and the Index Bet You Didn't Choose
- GameStop and the Stock Market
- Insider Trading, Reg FD, and Why Markets Have Rules
Explore listener stats, chart rankings, contacts and more on the Money Lessons with Andrew Temte, PhD, CFA podcast page.