'The Biggest Change To The Stock Market In Decades' Could Be Weeks Away: Would The SEC's New Plans Destroy Payment For Order Flow?

Zinger Key Points
  • A new market structure plan from the SEC could be unveiled at the Fed's upcoming meeting.
  • "Commissioners have a draft that's described as the biggest change to the stock market in decades," Gasparino says.

The Federal Reserve's final meeting of the year is slated for Dec. 14, and the stakes have been raised

What Happened: A new market structure plan from the SEC could be unveiled at the Fed's upcoming meeting, according to Fox Business' Charles Gasparino

"Commissioners have a draft that's described as the biggest change to the stock market in decades w an 'auction' for the handling of retail orders," Gasparino said Monday via tweet.

The Fox Business correspondent further explained that the current draft would significantly reduce payment for order flow, or PFOF.

Related Link: Would The SEC Really Ban PFOF? PreMarket Prep Weighs In

Why It Matters: The new changes would impact market makers and brokers who rely on order flow payments like Robinhood Markets Inc HOOD.

Robinhood and other brokers receive compensation (PFOF) for routing their orders to specific wholesalers like Citadel Securities and Virtu Financial Inc VIRT.

Robinhood generated more than 70% of its revenue from PFOF in the first half of the year, but its order-flow revenue from stocks and options trading fell 29% in the company's most recent quarter, per The Wall Street Journal. 

See Also: Robinhood Q3 Earnings Highlights: Revenue And EPS Beat, MAUs Decline, 'Volatile Market Environment' Impact

SEC chair Gary Gensler is reportedly rushing the new market structure proposal out before Republicans gain control of Congress. Notice of a meeting is likely to be announced next week, per Gasparino. 

HOOD Price Action: Robinhood has a 52-week high of $18.93 and a 52-week low of $6.81.

The stock was down 4.3% at $8.80 at time of publication, according to Benzinga Pro.

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