Datek Online, the dominant US brokerage for the day trading market, is to rebate $2.4 million in order flow payments to its customers for trades conducted during 2000.
Regulators have questioned payment for order flow because it appears to place a broker's profitability ahead of an obligation to offer best execution. Datek Online claims to be the only major brokerage to rebate these controversial payments.
Ed Nicoll, chairman and chief executive officer of Datek Online Holdings says: "Payment for order flow can present a conflict for brokers. Although $2 million dollars represents significant savings for our customers, it is relatively small by industry standards."
He adds that Datek receives modest payments for order flow because of its use of proprietary order routing technology.
The decision follows the release of figures by Datek which indicate a 22% year-on-year drop in February trading, with average daily trades down 28% against the previous month.