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You morons are going to get us regulated just because you don’t know what a limit order is

Ever since GMREEEE this sub has been filled with people from r/all calling for the end of payment for order flow for a variety of reasons. Now the front page has a news article talking about how the SEC chair is thinking about ending payment for order flow. I just wanted to say that if you’re against payment for order flow there’s probably a 95 percent chance that you don’t know what a call condor spread is. PFOF gives you no or reduced commissions and also makes the options market more liquid. Here are some arguments against PFOF that I’ve seen on this sub:

1. HedGe FuNd GiVe BAd FiL.

In reality you can set the price for what you want your options to be filled at. This can be done by making a FUCKING LIMIT ORDER. There is probably not a single professional option trader that buys or sells options with a market order. Options are, by their nature, illiquid on a majority of underlyings given that you have thousands of combinations of strikes and dates to choose from. Again, especially if you trade spreads, you should be placing limit orders for your positions. Also, if you remove PFOF this liquidity issue will only get worse. This is just the reality of gutting several billion dollar firms that write and buy options. Less money in the options market means less liquidity.

2. HooDgE FunD ManiPuLaeT MarkET wItH my OrDeR InForMatIoN

I can right now go on my think or swim platform and scan for options orders under 10k (or however large you want) and look at the bid/ask spread to tell if this trader bought or sold these options. If I really wanted to I could go into the API and make a robot that does this for me and organizes all this information into some sort of bullshit spreadsheet. Small orders like these (the kind retail makes) provide a reasonable guess as to where retail is positioned. I’m just some jack off wsb troll with a think or swim account and I have already laid how how to detect retail positions. If I can do it then the big dogs certainly can do the same even without payment for order flow.

One more thing: If you lose money on your 10 delta put it’s because it was a bad trade, not because some Algo picked out your 5 lot position and spent millions of dollars manipulating the market to shake you out of your 200 dollar position.

What do you think?

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34 Comments

  1. 1. **”Going to get us regulated”** Kinda fearmongering rant tbh.. why would there be more regulation on retail traders even if the PFOF ban would be passed (which is quite unlikely imho)?
    2. **”if you’re against PFOF there’s probably a 95 percent chance that you don’t know what a call condor spread is”** What do you think is a percentage of those who SUPPORT pfof and DO know what a call condor is? 🙂
    3. **PFOF gives you no or reduced commissions** nominally yes, but ppl oftentimes end up paying a higher cost by getting a worse fill quality. Just think: if the PFOF cut would not cover the otherwise charged fees, what would be the economic incentive for a zero-commissions brokerage?
    4. You mentioned putting a limit order? Well, you do get filled if the underlying price moves significantly to your advantage.
    5. **PFOF makes the options market more liquid.** I do agree with this one in the short run. If the PFOF would be banned it would very likely lead to liquidity deterioration and wider bid/ask spreads and as such worse price for retail traders. But even in that scenario retail brokerages would likely merge with HFT players or will develop HFT systems in house and that would lead to liquidity rebound.
    6. Wouldn’t that be wonderful if opponents and supporters of PFOF both had a choice? So retail brokerages would be required to offer a possibility to trade PFOF-free for an additional fee?

  2. Also some brokers use order flow without payment currently. Eliminating PFOF doesn’t fix order flow concerns it just prevents your broker from profiting from it. They will make up the difference somewhere, possibly by increasing user fees and continue using order flow anyways. For a better understanding check out some recent videos from Ziptrader who does a good job explaining it.

  3. You are wrong about limit orders, robinhood will mercilessly scam you even if you use them. Yeah you will guarantee the price you get filled at. But they will never fill you at the fair price. Especially not if there’s more than a 5 cent spread. For example, if you are trying to go long you will only get filled at your limit if the price starts dropping. I have opened level 2 quotes and if I try to bid on something using Fidelity I can see my bid go into the market. If I place a limit on robinhood it doesn’t show up in level 2 quotes, because Robinhood is actually bidding less and if that fills they turn around and give it to me for the higher price that I set my limit to. At the end of the day it’s not a lot of money but rather just use a broker that doesn’t do PFOF and actually fills my orders….

  4. No question that the 30iq *normies* are pushing for the PFOF ban. It will be a sad day when I have to start paying $7 a trade at TDA again. Not to mention $20 option exercising fees or assignment fees.

    PFOF is what allows most of the low capital degenerates to even trade. Imagine paying $20 a trade, $10 to buy $10 to sell, with $500 to invest. Hilarious.

  5. Everyone cheering for commissions to come back is surreal.

    I’ll make money either way but the dumb money (the easy gains) will be siphoned off by the brokerages after PFOF is gone.
    Get ready to experience the lean times newbies

    The rich always get the masses (retail) to cheer for their own demise.

    Hey Hedgie, let’s make sure there isn’t another GME!
    How?
    Get rid of the retail masses by charging commissions. They’re barely profitable now so it’ll be the nail in the coffin for more than half of them. Then we’ll freightrain the weakened remainder.
    How do we do it?
    Simple, gimme a straw-man.
    Ok, how about HOOD?
    Perfect!!

  6. Any decent DD or informative post is going to get downvoted or filled with troll replies.

    It’s good to remember that the people from r/all did not know what wsb culture was like before they flooded in.

    There was a mix of informative and shitposts that went around.

    If they get rid of payment for order flow, it will be the death of retail.

  7. It’s a requirement by law to provide your client the best possible price for an order. Payment for order flow is dangerously close to breaking this existing law.

    Personally I think it’s a great way to give traders “free” trades and it doesn’t really harm anyone who sets limit orders. I’m not setting up HFT on $HOOD so who cares?

  8. Oh no…don’t kill the Dark Pools…ThaT WilL dESTroY LiQuiDitY

    See what I did there?

    Liquidity has been used as a scare tactic whenever Wall St…um…”innovations” are threatened.

    The market functioned fine before PFOF.

    Oh, and who invented PFOF?

    PFOF was pioneered by Bernie Madoff. In a 2000 interview, he described it as a way for market makers to outsource the task of finding orders to fulfill, and compared it to retail arrangements in which a supplier pays for the rack on which its products are displayed. “No one tells a firm how they can advertise.”

    🤷

  9. Oh, you can just use an API and figure out retail order/position info? Bro, go talk to Citadel, they’re too dumb to figure this out so they are paying billions for getting the info!

    Do you think market makers are running a charity to help retail and are just paying RH for nothing? If not, from whom do you think they make up the money they pay RH and other brokerages?

    These posts that are filled with superiority complex usually come from the dumbest people on this sub!

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