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So it Really Isn't Free...Understanding PFOP

beebee
edited February 2021 in Other Investing
When the product is free, you are the product.

Zoom interview in linked article on the topic of how broker dealers get paid when they tell the retail investor that buying and selling is "free".

while-gamestop-was-being-squeezed-and-a-second-video-about-robinhood-pfof-and-short-squeezes/

Understanding PFOP:
https://investopedia.com/terms/p/paymentoforderflow.asp

Comments

  • If you didn't know this before creating a RH account, that's your own fault.....
  • I have not checked other firms; but the following is a standard footnote for other information at Fidelity, aside from what may be in a prospectus for a particular investment.
    Free commission offer applies to online purchases select ETFs in a Fidelity brokerage account. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal).
  • Josh Brown explains things entertainingly:



  • catch22 said:

    I have not checked other firms; but the following is a standard footnote for other information at Fidelity, aside from what may be in a prospectus for a particular investment.

    Free commission offer applies to online purchases select ETFs in a Fidelity brokerage account. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal).
    The lawyers got sloppy with that marketing material. The actual Fidelity fee schedule reads: "The Additional Assessment ... typically ranges from $0.01 to $0.03 per $1,000 of principal".

    This fee is often referred to as the SEC Section 31 fee. More or less, it is a pass through of a fee charged to brokers on sales of securities (stocks, ETFs). The fee charged to brokers is currently $0.0221 (2.21¢) per $1,000, but will be dropping to $0.0051 (0.51¢) per $1,000 on February 25th.
    https://www.sec.gov/news/press-release/2021-8

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