"We have consistently argued that payment for order flow is wrong. It presents the possibility for conflict of interest and acts in direct conflict with the spirit and intent of best execution requirements," said Salvatore Sodano, Amex chairman and CEO. "The Amex has held a strong line against payment for order flow. However, we can no longer stand by idly while our competitors continue to engage in this practice, ceding them an unfair marketplace advantage to the detriment of our business."
The Amex said it would begin by charging 40 cents a contract across the board for orders of 200 contracts or less and will charge specialists and market makers for trades of firms that accept payment for order flow. The program will begin on June 2 and Amex specialists will be responsible for determining which firms will be paid.
"There is absolutely zero value created in the marketplace by payment for order flow programs. But there are a lot of losers, including market participants who provide critical liquidity and competition to the marketplace," continued Mr. Sodano.
"The biggest losers, however, are investors, who will no longer be certain that their order is being executed for the right reasons. And after the last two years, the last thing we need to be doing right now is further add to the deterioration of investor confidence. Once again, I urge the SEC to take immediate action to end this practice once and for all."
