SEC Set to Let Wall Street Keep Payment-for-Order-Flow Deals

The US Securities and Exchange Commission will stop short of banning payment for order flow, a controversial way to process retail stock trades, as it proposes new rules for the $48 trillion American equities market.

The decision, described by people familiar with the matter, follows months of internal deliberations at the agency. It marks a win for brokerages that get paid for processing rights, although the SEC may still enact other changes that make the practice less profitable, according to the people.

The regulator, which is expected to unveil its plans in the coming months, declined to comment.

Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), speaks during a House Appropriation Subcommittee hearing in Washington, D.C., US, on Wednesday, May 18, 2022. The hearing is titled "Fiscal Year 2023 Budget Request for the Federal Trade Commission and the Securities and Exchange Commission."

Wall Street has been on edge since Gary Gensler signaled last year that the agency may outlaw payment for order flow during the overhaul. The practice often involves one brokerage routing retail stock trade orders to another firm for execution rather than to the New York Stock Exchange or Nasdaq.

The arrangements are pitched as giving investors the benefits of greater liquidity, but critics have questioned whether traders actually are getting the best price, with some of their potential profits going to the firm that bought the trading rights.