Odd Lots Virtu CEO Doug Cifu Explains Payment for Order Flow and the Future of HFT
Mar 29, 2021
Doug Cifu, CEO of Virtu Financial, shares his expertise on high-frequency trading and payment for order flow. He clarifies how these practices influence retail trading, especially post-GameStop. Cifu addresses misconceptions about market makers and explains how zero-commission trading has transformed the landscape for individual investors. The discussion dives into order routing complexities, the importance of execution quality, and the advantages of technology in enhancing retail trading experiences. A fascinating peek into the machinery behind today’s trading dynamics!
AI Snips
Chapters
Transcript
Episode notes
Market Maker Competition
- Competition among market makers focuses on price improvement, exceeding the national best bid and offer (NBBO).
- Brokers route orders based on which market maker offers the most price improvement.
Dark Pools Explained
- The NBBO represents publicly displayed prices from exchanges, excluding dark pools.
- Dark pools (ATSs) allow large orders to be executed discreetly, protecting investors from market manipulation.
Order Flow Allocation
- Brokers allocate order flow based on historical price improvement offered by different market makers.
- This allocation happens periodically (weekly or monthly), not on a per-trade basis.