Sen. Pat Toomey (R-PA) has introduced a bill that seeks to preserve commission-free trading by prohibiting the Securities and Exchange Commission (SEC) from banning payment for order flow.
The Investor Freedom Act of 2021 was presented in the wake of reporting indicating the SEC is considering banning payment for order flow after January’s stock market volatility.
Payment for order flow has been permitted by the SEC for decades, per authorities, and is defined as the small payment a broker receives for executing a trade on a customer’s behalf.
“New innovations—such as zero commission trading and user-friendly mobile apps—have allowed more Americans to participate in the stock market than ever before,” Toomey, ranking member of the Senate Banking Committee, said. “Such technologies have been made possible in part by payment for order flow. My legislation will stop the SEC from restricting investor freedom under the guise of investor protection by ensuring every day Americans continue to have access to and choices in the stock market.”
During a Senate Banking Committee hearing in March, Toomey cited a Federal Reserve statistic that revealed in 1989 less than one-third of U.S. households owned stocks. He noted 30 years later a majority owned stocks, with the most sizable growth occurring among lower- and middle-income households.