Regulatory Alerts2022-11-02
AFM assessment of order execution quality on PFOF trading venues
The Dutch Authority for the Financial Markets (AFM) issued a report analyzing execution quality on two Payment for Order Flow (PFOF) venues, one non-PFOF venue, and one investment firm. Using the Comparative Pricing Model, the AFM found that PFOF venues structurally provided worse execution prices for retail clients compared to reference markets, with significant price deterioration. The study confirms that PFOF creates conflicts of interest leading to inferior outcomes for investors and validates the AFM's post-trade data methodology as a robust tool for replication by other regulators.
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