In plain terms
Business Model where retail brokers (Robinhood, E*Trade, TD Ameritrade) route customer orders to wholesale market makers (primarily Citadel Securities with ~40% share, Virtu, Two Sigma Securities, Wolverine) who execute internally, capture…
Business Model where retail brokers (Robinhood, E*Trade, TD Ameritrade) route customer orders to wholesale market makers (primarily Citadel Securities with ~40% share, Virtu, Two Sigma Securities, Wolverine) who execute internally, capture bid-ask spread + provide small 'price improvement' to retail, and pay the broker a per-share rebate. Q1 2021 during the GME squeeze: Robinhood generated $331 million in PFOF revenue, of which $142 million came from Citadel Securities alone. Structural function: concentrates ~40% of US retail equity order flow under a single market-maker counterparty (Citadel Securities) whose parent entity (Citadel LLC hedge fund) operates on the opposite side of the same market. Legally firewalled; architecturally symbiotic.