So... basically front running ?? That’s what it seems like you are describing. They make money when they manage to get ahead and provide the liquidity needed to fill the orders. What am I missing?
It is not front running, and can only be conflated with it if you don't know what front running actually is, don't know what PFOF actually is, or both. Firms that pay for order flow are paying to be the counterparty to transactions that have razor-thin arbitrage opportunities. They are not placing orders with advance knowledge of upcoming orders; they are reacting extremely quickly to fraction-of-a-cent spreads in the price of a security and pocketing the difference.
Nothing. I can’t believe it’s legal. And yes, I know about the free trading it has supposedly provided. Maybe free trades are dangerous to to most retail traders?