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Payment for order flow

When a market center pays a broker to send it customer orders, how that sits alongside the duty of best execution, and where monthly reports disclose routing and spreads.

The short answer

Payment for order flow is a payment from a market center (an exchange, a market maker or another trading venue) to a broker for sending customer orders there. The SEC's trade-execution publication describes payments of perhaps a penny or more per share, including payments by some regional exchanges, third market makers and many Nasdaq market makers. The payment does not cancel the broker's duty to seek the best execution reasonably available. Monthly execution-quality and order-routing reports are the public place to see how orders were handled.

What the payment is

In Trade Execution: What Every Investor Should Know, the SEC explains that a broker generally has a choice of markets for a customer order. For an exchange-listed stock, the broker may send the order to the listing exchange, to another exchange, or to a third market maker. As a way to attract orders, some regional exchanges or third market makers will pay the broker for routing the order there, perhaps a penny or more per share. The publication calls this payment for order flow. It also notes that many Nasdaq market makers pay brokers for order flow.

The same publication states that the broker still has a duty to seek the best execution reasonably available for its customers' orders. That duty is about the terms of the fill (including the chance of a better price than the public quote, speed, and the likelihood of execution), not about whether a venue pays the broker. A payment can be one reason a venue is in the routing mix; it is not, in the SEC's description, a substitute for that duty.

Where the practice is disclosed

The publication describes SEC rules that require market centers that trade national market system securities to make monthly electronic disclosures about the quality of their executions, including how market orders of various sizes are executed relative to the public quotes, and about effective spreads (the spreads actually paid by investors whose orders were routed there). Brokers also make public reports on where they routed customer orders. Those reports, rather than a marketing page, are the primary documents for seeing whether a firm received payment for order flow and where orders went.

Payment for order flow is a cash payment from a venue to a broker for sending it customer orders.
The broker's best-execution duty still applies.
Monthly execution-quality and order-routing reports are the public record of where orders went and what spreads investors paid.

Common questions

What is payment for order flow?

A payment by a market center, such as an exchange or a market maker, to a broker for routing customer orders to that venue. The SEC's trade-execution publication describes payments of perhaps a penny or more per share.

Does the payment go to the customer?

The publication describes a payment to the broker. Whether any of that amount is credited to a customer is a matter of the firm's own practices and disclosures, not something the publication assumes.

Is payment for order flow a violation of best execution?

Not automatically. The SEC describes the practice and, in the same publication, restates the broker's duty to seek the best execution reasonably available.

Where can someone see how a broker routes orders?

In the public order-routing and execution-quality reports the SEC publication describes, which cover routing destinations, execution quality relative to public quotes, and effective spreads.

Who pays the broker?

The publication names regional exchanges, third market makers and many Nasdaq market makers as venues that may pay for order flow.

Disclosures

Editor holdings: The editor holds no position in any company named on this page. As of Nov 11, 2026.
Compensation: Nobody paid for this page. No affiliate links on this page.
Sources: Each company's own SEC filings, linked next to each number.
Last updated: Nov 10, 2026

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