Payment for Order Flow
From ACT Wiki
(PFOF).
Payment for order flow is defined by the UK Financial Conduct Authority (FCA) in FG12/13 [1], originally issued by the former FSA, as an arrangement whereby a broker receives payment from market makers, in exchange for sending order flow to them.
The FCA sees such arrangements (whatever called) as creating potential conflict of interest and pressing against best execution of orders for clients and, accordingly, compromising observation of its best execution rule.
More generally in the European Union, such payments may fall foul of the EU's MiFID rules on "inducements" reflected in the FCA's Handbook ([[2]] at 2.3.1).
