Davis Polk partner Zach Zweihorn discussed the SEC’s proposed equity market reforms and the impact they may have on payment for order flow with Risk.net.

“Payment for order flow” refers to the compensation retail brokerages receive for executing trades for market-makers. The SEC’s proposed reforms would potentially compress the rebates that exchanges pay market-makers, which are then passed along to retail brokers. This could increase competition and allow more market participants to fill orders. Certain start-ups aim to take advantage of the opportunity to challenge incumbent companies.  

“Whatever the SEC ends up coming out with, somebody is going to be smart enough to figure out a business model to potentially disrupt the incumbents,” Zach noted.

“Start-up trading venue aims to profit from SEC’s market shake-up,” Risk.net (May 1, 2024) (subscription required)

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