Abstract
This study examines commission savings and execution quality for off-exchange retail trades and comparable on-exchange trades. Using both public and private order and execution data, we debunk some commonly held misconceptions about payment for order flow (PFOF). We find that PFOF has saved retail investors billions in unnecessary fees by allowing broker-dealers like Robinhood to eliminate trading commissions. We also find that retail investors, and especially Robinhood customers, have enjoyed substantial price improvements on trades executed off-exchange and that off-exchange retail trades generally experience better execution quality than trades of similar sizes on public exchanges.
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