Larry Harris
Payments for Order Flow
"Most retail brokers send the vast majority of their clients’ stock orders to dealers and not to exchanges as most people would expect. The dealers pay the brokers for receiving these orders that they then fill. These payments, called payments for order flow, create a conflict of interest between brokers and their clients. Clients want their brokers to send their orders to wherever they would get the best prices. But brokers want to receive these payments. In this podcast, Professor Larry Harris, an expert on market microstructure and a former SEC Chief Economist, explains what payments for order flow are, why investors should be concerned about them, and what the SEC can do about the practice. Professor Harris holds the Fred V. Keenan Chair in Finance at the USC Marshall School of Business."
