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What Is the “Best Execution” Rule and How Does PFOF Challenge Its Spirit?

Best execution requires the most favorable terms for the client; PFOF creates a conflict where the broker's payment may be prioritized over the client's absolute best price.
Greeks.Live10.11.25

What Is the “Best Execution” Rule and How Does PFOF Challenge Its Spirit?

The "best execution" rule legally requires brokers to take all reasonable steps to obtain the most favorable terms for their clients' orders, considering price, speed, likelihood of execution, and order size. Payment for Order Flow (PFOF) challenges the spirit of this rule because the broker receives payment for routing the order to a specific venue, creating a potential conflict of interest where the broker's financial gain might supersede the client's absolute best execution price.

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Define “Internalization” of Orders and Its Potential Impact on Price Improvement

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