Payment for order flow (pfof) is demininis revenue for both sides.
Look at Schwab's income statement: pfof is less than 1 percent of it's $5bn 2018 revenue. On the other side, the traders or internalizers, they must pay to buy this order flow and it's a competitive landscape. The money they make on the flow barely covers what they pay for it. Markets have become very efficient.
My sources: Schwab annual report. Also I used to internalize trades at a big bank. I still know some people at the big shops who still do it.
Right they make all their money on margin. Most people are not trading a lot- but if you do- you will get fleeced- especially with any kind of a complex order.
Look at Schwab's income statement: pfof is less than 1 percent of it's $5bn 2018 revenue. On the other side, the traders or internalizers, they must pay to buy this order flow and it's a competitive landscape. The money they make on the flow barely covers what they pay for it. Markets have become very efficient.
My sources: Schwab annual report. Also I used to internalize trades at a big bank. I still know some people at the big shops who still do it.