[dayone1]

1) are you going to sell your trade flow to Citadel / market makers like Robinhood and your competitors do? That's the dirty secret way of making money that you seem to have completely excluded. The reality is that adds up to substantial "invisible" fees that the investor has no transparency over because you sell your trade flows to them and they make a higher than normal spread. And the whole "doesn't matter if we sell your trade flows, the rules require you to get best execution" is a farce and everyone in the industry knows this - otherwise there is no reason why Citadel or Virtu would bid billions of dollars to just buy the trade flow.

2) Are you going to rebate your borrow fees back to investors? This is the other dirty secret way of making money. Many people don't realize that you can earn lending fees by lending your shares out for people looking to short stocks, and those add up to substantial amounts over time for a scaled asset manager. Do you keep this instead of rebating it fully back to your customers?

3) If the answer is no, you don't sell trade flows and yes, you will rebate your borrow fees, can you make a lifetime commitment that you won't go back on your word? Many people who start in this industry say they won't sell trade flows and then after they reach scale they change the footnotes and agreements and starting selling trade flows.

[wrsh07]

Pfof is woefully misunderstood

In general, citadel wants to pay to trade with retail investors because it knows it isn't going to face adverse selection. So it will give them tighter bid/ask ratios (this is better for the customer) than they would get if they were trading in the open market, citadel isn't going to get hosed by one of them (because there's no adverse selection)

It's win win win

[taway789aaa6]

> PFOF and excessive off-exchange trading persist because so many trading platforms rely on the revenue it generates, essentially productizing their clients. Defenders of PFOF have claimed that retail brokers who route to high-speed traders (in exchange for PFOF) provide better price execution for investors and that it’s a net positive, despite creating an inherent misalignment between these platforms and their customers, and despite public evidence to the contrary. Leaning on the flawed argument that they categorically provide retail customers with best price execution quality, there is little by way of self-regulation to foment change or prevent applications designed to optimize transaction volume (i.e. speculation and day trading) and risky activity (i.e. margin and options trading). Further, their ability to claim best execution is part of the flaw of the system, as even within the current structure better outcomes are possible on an order-by-order, and aggregated basis.

https://advocacy.urvin.finance/advocacy/we-the-investors-pfo...

Not a win win.

[gruez]

>and despite public evidence to the contrary

Sounds serious, I wonder what it is...

>"410 The author deleted this Medium story".

doesn't look promising. The rest of the paragraph fails to state any concrete harm, instead focusing on abstract issues like "misalignment between these platforms and their customers", and "little by way of self-regulation ".

[Anon1096]

There is nothing in that statement that actually shows negative effects of PFOF.

> creating an inherent misalignment between these platforms and their customers

is just speculative harm, and as to the other part about preventing risky trading - this is literally what Robinhood et al customers want!

Meanwhile PFOF actually does have proven benefits in that it reduces spread for retail investors.

[Ntrails]

> Meanwhile PFOF actually does have proven benefits in that it reduces spread for retail investors.

To be fair, some of that is because its existence changes the pool of people trading on lit and thus increases spreads there. There are systemic effects that are a function of pfof that make it look better, and ofc there are a wide range of actors of varying quality...

[highwaylights]

This.

It seems very much like that bogus stat that HR departments were peddling 20 years ago about how they only hire the top X% of people because they reject (100-X)% applicants - it tells you nothing about the quality in the gap.

These systems don't have to actively attempt to front-run you or pro-actively make bad trades, they can just optimize for deal flow, which is enough to cause the customer to get a sub-optimal price.

[freeone3000]

You’re getting a price as good or better than if you had routed it through the backing exchange directly. National Bid or Best Offer continues to be the rule.

[wrsh07]

I think you're only highlighting my point that it's woefully misunderstood

The fact that 70k people signed a statement making a bunch of strong but vapid claims is umm telling

Let's take a longer money stuff excerpt:

>>> Some retail brokerages seem to make a lot of their money from payment for order flow. Others make less. Some big retail brokerages do not accept any payment for order flow at all: They still use this system (routing their orders to market makers), but they take 100% of the value in the form of price improvement for their customers instead of payments for themselves. Intuitively, you might think that the brokerages that get a lot of PFOF would get worse price improvement.

But, nope! Here is Bill Alpert in Barron’s:

Critics of retail brokers like Robinhood Markets condemn those companies for routing customers’ orders to market makers like Citadel Securities in exchange for payments. ...

The suspicion is that greater payments to brokers must be offset by less favorable execution prices. But that isn’t what a new study finds.

In an Aug. 13 working paper, five finance professors analyzed 85,000 stock trades they made through five leading retail brokers. They did get significantly different pricing through different brokers for identical orders to buy or sell at the current market price.

But their best pricing came from a broker that takes payment for order flow, namely TD Ameritrade, now a unit of Charles Schwab. Fidelity, which takes no order payments, got worse prices on the professors’ trades than did TD Ameritrade. And its prices were no better than those from the E*Trade unit of Morgan Stanley, which does take payments. Robinhood, which used revenue from order-flow payments to subsidize the industry’s first commission-free trading, delivered middle-of-the-pack pricing. Interactive Brokers ranked last in the execution pricing of the professors’ orders.

That's from https://news.bloomberglaw.com/mergers-and-acquisitions/matt-...

Excerpted Barron's: https://www.barrons.com/articles/payment-for-order-flow-sec-...

Paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4189239

[throwacomment]

Yes, PFOF is woefully misunderstood but its very much not win win win.

The reason its bad is because its anti-competive and gives them information that no-one else has access to.

By trading against you, Citadel prevents any other potential market maker from trading with you. With less competition, the spread widens and even after price improvement, you're paying more.

PFOF also tells them who they are trading against but anyone else who just sees a quote doesn't know that.

Generally, things are very zero sum so wins all around are very unlikely. But some thinking is needed to track where the value loss and gains are.

[wrsh07]

Please see my other comment that provides links to a study that shows: yes you get the best price from a broker using pfof

Your argument seems reasonable but isn't borne out empirically

https://news.ycombinator.com/item?id=42378516

[throwacomment]

I'm not talking about you getting a worse price today.

Suppose in some other industry, some monopolist consistently sells goods at a loss to drive out all the competition. In the last moments when they are doing this, yes its cheaper for you to buy from the monopolist at that moment. But after everyone is driven out of the market, you'll be paying more. Even though the monopolist is still the cheapest amongst all options.

I'm saying you're already in the "after" scenario here. You're saying that you can save a few cents with PFOF when you cross that 50 cents spread and yes that's true. But I'm saying that spread should be 25 cents and no-one is offering that because they've been driven out.

Now that I think about it, the more immediate consequence to you is that some of your order will not fill because PFOF exists, rather than you getting a worst price. Say you put a bid to buy at 100. And then I come along and want to sell at 100. Normally, you'd get to buy from me. But because my order is PFOF'd, Citadel decides that buying from me at 101 is a good deal so they do. This happens a few time with different sellers then you get fed up and/or the market moves. So you raise your bid to 150. Citadel sells to you at 149. You saved 1 off that 150 but lost out 49 from the trade you'd have gotten from me without PFOF.

[wrsh07]

This example is apples to oranges

Imagine you are a market maker: you offer 2 APIs. The first, you allow anyone to trade on. The second, you only allow traders who are doing less than 100k in volume per day (and don't allow users to have multiple accounts)

Which API are you able to offer tighter bid/ask spreads on? Why?

That's the point. Pfof is saying: the second API is so valuable to me that I'm willing to pay to obtain customers. In the worst case, there will always be the open-to-all API.

Your second example continues to show the lack of understanding. You're saying: without the market segmentation, somehow I have a wider bid ask. That's not right at all. The entity that gets bad spreads is going to be the entity that would take advantage of good spreads. That's the whole point. Maybe there's a point that vanguard ends up getting worse execution because it gets lumped in with the rest of the market, but the counterargument to that is essentially just volume: is the retail market big enough that if you didn't segment them onto a better spread that the overall market would end up with better pricing. The answer: maybe! In some things! Is that really what the people who hate pfof want though?

My understanding is that people who hate pfof are actually the ones benefiting the most from it. (ie because unsophisticated investors get better execution)

[throwacomment]

PFOF does two things and you're only focusing on half of it.

1. It segments the counterparty they trade with.

2. They get dibs on new orders arriving.

You're only talking about 1. I'm talking about 2.

1 is also bad because this segmentation also gives them inforamtion no-one else can get. But the chain of reasoning to concretely show why its bad (for someone getting their orders PFOF'd) is less obvious and longer.

> Imagine you are a market maker: you offer 2 APIs.

This is so wildly different from how market works. You'll have to clarify what you mean. If the only way to trade is through the API, then you'll offer infinite spread on both. If normal markets exist alongside, then I don't bother using either.

[wbl]

Dude, I want the market to see I'm a moron! I'm not buying BH because I've observed private jets between Omaha and Washington but because I'm saving after having been paid.

[throwacomment]

Then find a way to tell everyone this in the open, not just Citadel. Then anyone else is free to trade against you. There can even be a micro-auction to get you the best price among all counterparties that want to trade with you. There's already auction mechanisms at some exchanges so I'm thinking attaching a voluntary "this order came from Robinhood" tag to your order shouldn't be too hard?

[lldb]

It is not a win. In a recent study, Robinhood with Citadel has the worst price improvement (execution quality) of any brokerage on the market. I’ve personally observed this - Robinhood might “improve” by 1/10 of a cent from NBBO while Fidelity is frequently closer to the mid.

[loeg]

How is that not a win? Robinhood customers still got better execution than NBBO. If you don't like Robinhood getting a tiny kickback here, you're free to go to another brokerage.

[wrsh07]

This is just noting that different brokers give different performance

That doesn't really have anything to do with pfof (TD Ameritrade gives better execution and receives pfof)

https://news.ycombinator.com/item?id=42378516

[loeg]

Presumably a market maker would pay (PFOF) slightly more to deliver slightly worse execution (keeping the spread).

[wrsh07]

Sure that sounds plausible but it's literally not what happens in practice (see the other comment I linked that discusses research on this very thing)

[loeg]

Yeah, I've seen the Levine column on it.

[wrsh07]

Here's the money stuff excerpt: https://marginalrevolution.com/marginalrevolution/2021/02/th...

> I feel like most of what I read about payment for order flow is insane? Otherwise normal people will start out mainstream explainer articles by saying, like, “Robinhood sells your order to Citadel so Citadel can front-run it.” No! First of all, it is illegal to front-run your order, and the Securities and Exchange Commission does, you know, keep an eye on this stuff. Second, the wholesaler is ordinarily filling your order at a price that is better than what’s available in the public market, so “front-running”—going out and buying on the stock exchange and then turning around and selling to you at a profit—doesn’t work. Third, because retail orders are generally uninformative, the wholesaler is not rubbing its hands together being like “bwahahaha now I know that Matt Levine is buying GameStop, it will definitely go up, I must buy a ton of it before he gets any!” The whole story is widely accepted but also completely transparent nonsense.

[1oooqooq]

it's already public that frontrunning is perfectly legal if you can do it with large volume as to not show intent of frontrunning one single person.

[slt2021]

yeah, Citadel's annual $30,000,000,000 profit is not coming out of thin air or just from bid-ask spread. Customers are being taken for a ride definitely

[nobodywillobsrv]

Adverse selection goes both ways. If PFOF leads to adverse selection against your flow then it's not win-win. You might say you are willing to trade of adverse selection up to the cost of the fees, but then you are trading a known fixed fee for an unknown stochastic penalty. And also who sets the fees?

The entire thing is adversarial and it's really just a choice of game you choose to play.

[WiSaGaN]

It's not. Centralization of liquidity is better for everyone. HFT thrives on fragmentation of liquidity. HFT is not wrong, but fragmentation of liquidity is.

[rjrdi38dbbdb]

Nope. It's not better for known uninformed traders. If you mix them in with informed traders, market makers must widen spreads.

This is very obvious in institutional FX. Pure "retail" flow will get quoted much tighter spreads by banks and market makwrs than you'll see on any ECN. Yes, it can get skweded against predictable flow, but a true "noise" trader won't be affected by that and will definitely be better off with tailored liquidity.

[WiSaGaN]

You don’t have to trade with market makers.

[rjrdi38dbbdb]

So you're hoping get price improvement by crossing with other trader orders in the book?

Unless you have a good high frequency predictor and low latency order management (you don't), you're going to experience adverse selection. Either because you're taking resting orders that HFTs are smart enough to avoid or because your resting orders get run over by informed traders.

[WiSaGaN]

So you are saying HFT will avoid your market order in this case, while HFT will provide better price when they are the sole counter party in separate liquidity pool? HFT will always maximize profit. To have multiple venues you are just paying HFT as middle man to transfer liquidity from one to another, where you can trade directly with each other if everyone is on one venue, e.g. one centralized limit order book. Transfering liquidity is not HFT's fault, but saying paying for order flow is better for retail is just disinformation. Without evenly discussing the function of HFT, you will get disinformation that demonize HFT as well, and common people won't listen to you later.

[neximo64]

Distorted incentives

[hn_throwaway_99]

> If the answer is no, you don't sell trade flows and yes, you will rebate your borrow fees, can you make a lifetime commitment that you won't go back on your word?

To be honest, why would you even ask that? "Lifetime commitments" are ridiculous. It's simply not a promise that any founder or business owner could ever make. Businesses get sold, circumstances change, etc. It's better to just accept that as a risk factor and decide whether or not you'd be comfortable taking on that risk.

[BobaFloutist]

>Businesses get sold, circumstances change

Is there really no way to put a binding bylaw in incorporation papers that will survive a sale? Something like a land-use covenant, but for a corporation?

I'm not sure that's necessary for this particular case, but for something like private data exposure I've been playing with the idea that it's the only way to actually trust a company with your data.

[hn_throwaway_99]

In the US, not that I'm aware of. I suppose it would be possible to add a "poison pill" ("If we change this, we'll pay everyone $X dollars") to then just make it a normal contract, but again essentially no company would be willing to do that because it extremely limits their options. Also, "forever" is a lot shorter than people think, it's only as long as the powers-that-be are in a position to enforce a contractual position.

[1oooqooq]

nonsense. there's millions of ways.

one is to be upfront about it on every advertisement and service description... can't get any easier than this. and is as effective as the complicated canary shenanigans.

[hn_throwaway_99]

> one is to be upfront about it on every advertisement and service description

Did you even bother reading the thread? What happens when your company gets sold, and all the old promises are thrown out the window? This has happened many times before (just ask Palmer Lucky about Facebook logins for Oculus), and that is what people are asking is preventable, and your suggestion does nothing to solve that problem.

[1oooqooq]

the marketing will have to remove all promises, so customers can move out.

they get around this using platitudes, like "do no evil".

[rcMgD2BwE72F]

>Businesses get sold, circumstances change, etc.

More importantly, founders also lie about their intent.

It's easier to trust owners when they commit and are ready to go to court over their promises. Ever heard of Lavabit? https://en.wikipedia.org/wiki/Lavabit

It's never ridiculous to ask. What's ridiculous is for founders to make their customers believe they're ethical when they're not. Let's ask then, and you don't have too high expectations.

[rancar2]

1 and 2 are volume based hence 3 once the volume is there.

To the OP dayone1: What’s your concerns with 3 exactly? Double’s structure is innovating on the fee front like an extreme Vanguard 2.0, so overall the structure (even if 3 takes place like Vanguard) is still the best deal on the market for an individual.

[wbl]

The reason people pay for trade flow is the same reason they sit at the table of drunks when playing poker.

[TeaBrain]

It's more like paying for the privilege of operating a monopoly on poker tables, with the guarantee that the rake will be kept low, so that the operator is not competing with other entities for the customers' rake. A market maker's competition to collect the spread is with other market makers, just like a casino's main competition to collect the customer's rake would be a different casino.

[wbl]

Read Reg NMS before you opine on this. It's short!

[TeaBrain]

As long as the market maker is executing orders at the NBBO on their ATS, they shouldn't be in conflict with Reg NMS, even though they are the only operator with the ability to market make on their ATS. Paying for order flow allows market makers to avoid competition in capturing the spread at the NBBO, however small the spread may be, while also helping to guarantee liquidity to capture the spread on, by giving them the sole privilege to market make on those orders.

Returning to the earlier poker table analogy, I mentioned that the operator with a local monopoly on poker tables, would be required to keep their rake low to keep their local monopolistic privilege, as an analogy to how market makers also have to keep their spreads in line with the NBBO (due to Reg NMS), in order to keep their privilege of executing orders on an ATS.

[dehrmann]

It's slightly different. With poker, you play with drunks because they make mistakes. With order flow, you want trades from small fish who don't have any special knowledge so you market make and not be taken advantage of, yourself.

[slt2021]

Except that unlike in casino, in stock market a Designated Market Maker can go against the crowd and "wait it out" any negative downfall.

Lets say customers bought GME and GME shoot up. Citadel just waited out until the movement fizzled out. They were able to hold naked short position for prolonged period of time (basically printing fake shares) to artificially increase the float

[rs999gti]

> sell trade flows

This is the real reason for low/no broker fees. Don't believe any broker that says they will input orders without taking their cut otherwise they (automated or not) would not exist.

[shred45]

> they make a higher than normal spread

Is this known for sure? I thought the value of this order flow to them was the lack of adverse selection.

[shmatt]

I dont know the reasoning behind this comment, but YC isn't a charity. The investment was made with the hopes of making 100x return without customers paying fees. Obviously there are other cashflows in play

[mguerville]

Or the investment was made under the assumption the business model to gain traction isn't the same as the future one that generates cash flow. Plenty of company start with a free or cheap product then up their pricing once the value is proven and there's a percentage of their users that fears the switching costs

[is_true]

Maybe they are expecting for an exit from a company buying them and then raising fees

[TuringNYC]

>> are you going to sell your trade flow to Citadel / market makers like Robinhood and your competitors do?

Is that really a problem if you're still getting NBBO (https://en.wikipedia.org/wiki/National_best_bid_and_offer)

Could you explain the downside of selling order flow if you're getting no worse than the current NBBO?

[ddulaney]

For 1 — dude, please back off the “[the rules] are a farce”.

Citadel and friends pay to trade with you because they think you’re dumb and they can make money off you. They’re giving you or your broker a better deal because they think they’re smarter than you. That’s all it is. They’d rather trade with you than with the median person on the market. Because they think you’re dumb.

You’re welcome to be insulted by that. It’s an insulting thing. But it’s not some grand conspiracy.

[shred45]

Its not the median they are worried about, its the 99th percentile. They _dont_ want to trade with Optiver, 2 Sigma, etc, or some hedge fund thats working a massive trade.

Trading with a highly sophisticated counterparty can be very costly and undo the small profit they have made from thousands of other trades.

[gruez]

>Citadel and friends pay to trade with you because they think you’re dumb and they can make money off you. They’re giving you or your broker a better deal because they think they’re smarter than you. That’s all it is.

More to the point, just because they're smarter than you, doesn't mean you're taking a loss by trading with them. The public markets are shark tanks, and it's better for both sides to avoid it. Market makers can make money off the spread (eg. buying at $3.14 and selling at $3.16 and pocketing the difference) without the risk of getting run over by a hedge fund, and retail traders benefit through tighter spreads, which the market makers can offer because they know the typical retail trader isn't a shark.

[chii]

> because they know the typical retail trader isn't a shark.

so why don't the sharks use robinhood, which then they can do their shark thing there, but at a better price than before?

[gruez]

1. "sharks" in this case doesn't mean some guy trading out of his house with 6 monitors. They are institutional investors. They can't exactly open a robinhood account, which only serves actual people. Professional traders also value other niceties, like being able to trade on their desktops (rather than having to type in their orders on their phones), which is worth the 1-2 cents per share in potential savings.

2. It doesn't have to be 100% effective. For every day trader that's beating the market and running over market makers with $1M orders, there's a 100 that's losing everything in ill timed trades on meme stocks. As long as there's less sharks than the public markets, they'll come out ahead.

[GenerWork]

>Professional traders also value other niceties, like being able to trade on their desktops

In fairness to Robinhood, they did just release a desktop version[0].

[0] https://robinhood.com/us/en/legend/

[gruez]

I stand corrected, thanks!

[n2d4]

Robinhood doesn't want the sharks because that would cut into their monetization strategy. So they specifically don't build features that sharks would need, some just convenient (eg. trading interfaces), some very important (eg. tax statements).

[taway789aaa6]

The "farce" is that when a market maker like Citadel purchase your order flow, the orders are typically not routed to the lit market (e.g. NYSE, IEX, etc) but instead routed to "alternative trading systems" (ATS) e.g. "dark pools" where your purchase has no effect on the price of the security.

This breaks the whole idea of a "market" where every buy puts upward pressure on a price and sales put downward pressure. Thus, a "farce".

That's not even getting started on the "farce" that is an ETF and how they are balanced/re-balanced.

Gotta love brokers that don't have your best interest in mind. Who needs best execution? /s

[gruez]

>but instead routed to "alternative trading systems" (ATS) e.g. "dark pools" where your purchase has no effect on the price of the security.

1. alternate trading systems are obligated to print their trades to the ticker, albeit at a slight delay compared to official exchanges

2. price is dictated by supply and demand, not the trade being publicly announced on exchanges. Trading volumes not being public probably has some non-zero effect on price discovery, but claiming that it has "no effect" is absurd.

[shred45]

Order flow in dark pools does impact the price of a security. The market maker will eventually need to trade out of that position. If there is aggregate buying pressure in the dark pool, they will adjust their quotes in both dark and lit markets.

[taway789aaa6]

> The market maker will eventually need to trade out of that position

This is why Citadel has $60+ billion dollars of "securities sold not yet purchased" on their financial statements.

They have sold $60+ BILLION of shares to investors and not yet bought the underlying securities.

So when exactly will that $60 billion of buy pressure hit the market?

[gruez]

>This is why Citadel has $60+ billion dollars of "securities sold not yet purchased" on their financial statements.

1. source?

2. supposing this is true, what's their daily turnover? "60+ billion" sounds like a lot, but if that's their daily turnover that shouldn't be anything out of the ordinary.

[Lionga]

1. Just look at their financial statements they , nobody is allowed this naked shorting but Cidatel is because they are a market manipu ahhh sorry maker.

Not that others won't naked short also, it is just they do not do it openly.

[toast0]

> They have sold $60+ BILLION of shares to investors and not yet bought the underlying securities.

> So when exactly will that $60 billion of buy pressure hit the market?

Citadel needs to deliver the stock they sold on T+1 as of May 28, 2024. There's some allowance for failure to deliver, but the data is out there, if Citadel is routinely failing to deliver, you should be complaining about that, not about their financial statements.

Meanwhile, if Citadel wants to pay me fractional pennies more per share than a public exchange, and also my brokerage fractional pennies for the privilege, who am I to say no? Especially when the public exchange may charge me a fee to trade.

[slt2021]

they can keep failure to deliver forever until the market moves in their desired position to actually send orders to lit market.

they use derivatives and heavily recycle buy/sell shares to keep kicking the FTD can down the road for as long as the market returns to their desired position.

[snapcaster]

If you actually don't understand why that citadel statement said that you should read up on how market makers work. Any given snapshot in time for them would have enormous quantities of securities on both sides because they have to hedge all of their activities to remain neutral to any price movements.

>So when exactly will that $60 billion of buy pressure hit the market?

it probably did shortly after the statement, coupled with a likely similarly sized "sell pressure". They're constantly buying and selling things that's how the business model works

[jkulubya]

Leaving aside the veracity of that figure, if they've sold $60B of shares they don't own then they must've sold shares they borrowed in some way, and that shows up in the demand/supply. Someone (or someones) in the market would know.

[Lionga]

As a market maker Citadel is allowed to do naked shorting.

[shred45]

I don't think this really tells you anything, and it also will impact the quotes they are making, even if they are holding the position for now.

[BobbyJo]

> That's not even getting started on the "farce" that is an ETF and how they are balanced/re-balanced.

Have any pointers to info on this? I'm looking to buy into some ETFs but I've been unable to find much information on balancing (I'd like to selectively manage my exposure to some stocks that are heavy in indexes at the moment).

[taway789aaa6]

Schwab has a pretty good explainer: https://www.schwabassetmanagement.com/content/understanding-...

Ultimately the AP (authorized participant) is incentivized to make ETFs available because they get to use supply/demand imbalances as an arbitrage opportunity.

> The creation and redemption mechanisms help ETF shares to trade at a price close to the market value of their underlying assets. When ETF shares begin to trade at a price that is higher than the market value of their underlying assets (at a “premium”), APs may find it profitable to create ETF shares by buying the underlying securities and exchanging them for ETF shares, and then sell those shares into the market. Similarly, when ETF shares begin to trade at a price lower than the market value of their underlying assets (at a “discount”), APs may find it profitable to buy ETF shares in the secondary market and redeem them to the ETF in exchange for the underlying securities. These actions by APs, commonly described as “arbitrage opportunities,” help to keep the market-determined price of an ETF’s shares close to the market value of their underlying assets.

http://www.understandetfs.org/creation_redemption.html

My understanding is that volatility is good for ETF APs because there are more arbitrage opportunities.

[nick3443]

Be careful lending out your shares (for example on ibkr) you can lose your qualified dividend status.

[throwacomment]

Does anyone rebates 100% of the borrow fee or did that initially?

[maest]

PFOF is good for the customer.