Zero commission. It’s the pitch that has won the most market share among retail brokers over the last decade. But no business works for free — someone pays the bill. In most cases, that “someone” is you, in the form of a slightly worse execution price than you could have gotten. This is called Payment for Order Flow, and understanding it changes how you choose a broker.
What exactly is Payment for Order Flow?
Payment for Order Flow (PFOF) is an arrangement where your broker sells your order flow — before executing it — to a specialized intermediary (a “market maker”), who pays for the privilege of being the one to execute it. The broker earns from that payment, not just from your commission.
The problem isn’t that an intermediary exists: it’s that by paying for your order, that intermediary has an incentive to execute it at whatever price benefits them most, not necessarily the best price available in the market at that moment.
If you can’t see where a company’s revenue comes from, chances are the product — or in this case, your order — is the merchandise. That doesn’t automatically make the broker “bad,” but it does change the incentives it works with.
The case of Interactive Brokers
Interactive Brokers’ official position is that it doesn’t accept Payment for Order Flow, either in stocks or options. Instead, it relies on Smart Routing, which competes in real time across dozens of trading venues to find the best price, with nobody paying it for where it routes your order.
That has a direct consequence: its commissions aren’t €0. It charges per trade. But that explicit cost buys something that never shows up on any statement: an incentive aligned with yours.
Two different business models
Broker with PFOF — €0 commission, but revenue comes from selling your order flow to a third party
Broker without PFOF (like IBKR) — charges an explicit commission, but the routing works solely to get you the best price
How much is “a slightly worse price”?
Individually, the price difference per trade is usually a matter of cents — it looks insignificant. The problem is repetition: if you trade frequently, those cents add up trade after trade, year after year. And in options, where bid-ask spreads are already wider than in stocks, the margin for improvement (or deterioration) is bigger.
The 2026 European ban
The European Union has decided to settle the debate through regulation: it bans Payment for Order Flow starting in 2026, as part of the MiFID II review. The regulatory logic is the same we’ve been explaining: an intermediary that pays for your order has a structural conflict of interest against your best execution.
Regulators such as ESMA have also announced they will clarify the multilateral trading framework for certain retail execution venues, which until now operated in a regulatory gray area.
What to ask your broker
- Do you sell my order flow to any intermediary?
- How many execution venues do you have access to?
- Do you publish execution quality reports, as MiFID requires?
If you want to dig into how the system that replaces PFOF actually works at brokers like Interactive Brokers, we cover it in detail in our article on Smart Routing. And if you trade options with this technology behind you, ProRealTime has the analysis tools to make the most of it.
Conclusion
Payment for Order Flow isn’t necessarily a scam, but it is a bent incentive: someone who pays to execute your order has reasons not to always look for your best price. A “€0” commission is almost never entirely free — it just changes who pays and how. Understanding this is the first step to choosing a broker with your eyes open, not just looking at the commission number.
