The Hidden Costs of Zero-Commission Trading
The elimination of trading commissions by online brokerages in the late 2010s marked a seismic shift in retail investing. What began as a democratizing force—allowing novice investors to trade stocks and ETFs without upfront fees—has revealed complex trade-offs. Behind the veneer of 'commission-free' platforms lie revenue streams like payment for order FLOW (PFOF), where brokers profit by routing trades to specific market makers.
Critics argue PFOF creates conflicts of interest, while proponents maintain it sustains liquidity. The debate underscores a fundamental truth: in finance, there are no free lunches—only repackaged costs.