Payment for Order Flow: Quadro Normativo, rischi sistemici, profittabilità e impatto sul trading di investitori retail.

This thesis aims at analysing the recent financial events which shed a light on Payment for Order Flow, a financial system in which retail brokers reroute clients’ orders to Market Makers for ex-ecution. This has allowed brokers to cut the commissions and attract more and more retail inves-tors to the financial markets. Oftentimes these retail investors are not financially prepared to in-vest their money but are more and more attracted by the gamified and easy-to-use platforms, regardless of the complexity of the products they invest in. During the pandemic period, retail investors have poured into the stock, crypto, and options markets an amount of liquidity never experienced before, and in 2021 the Short Squeeze of GameStop orchestrated by retail investors through social media highlighted all the drawbacks of Payment for Order Flow and the conflict of interest which is created between the brokers and the Market Makers. Through the analysis of Report 606 which American brokers need to disclose, this thesis has analysed the revenue gener-ated by ten American brokers, how much each Market Maker has paid in 2020 and 2021 to exe-cute retail orders, the price per execution paid by each broker to each Market Maker and the impact of Payment for Order Flow in 2020 and 2021. Furthermore, an analysis of the current legislative framework in the United States has been conducted and how the situation in Europe differs from the American one. This topic is currently being discussed in institutional venues and is subject to change, especially in the United States where it is largely utilised by brokers as an alternative source of revenue. Should it be permanently banned, it will certainly have an impact on many brokers who will need to revise their business model.