Fidelity reverses course, starts selling customer order flow in major policy shift

Fidelity Investments, the firm that built a marketing identity around not selling your stock orders to the highest bidder, is now doing exactly that. The brokerage giant has begun accepting payment for order flow on equity trades, routing customer orders to wholesale market makers like Citadel Securities in exchange for compensation. The policy change, disclosed in a regulatory filing earlier this year, drew significant attention after the Wall Street Journal reported on it in late August. Claims circulating online suggest the practice is generating roughly $10 million per month in revenue, though no public regulatory filing has confirmed that specific figure. What payment for order flow actually means Payment for order flow, or PFOF, works like this: instead of sending your buy or sell order directly to a stock exchange, your broker routes it to a middleman, typically a large market-making firm. That middleman pays your broker a small fee per share for the privilege of executing the trade. The market maker profits from the spread between buy and sell prices, your broker gets a revenue stream, and you, the retail investor, get what everyone promises is still a good deal. Fidelity’s...