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Shares of Robinhood (NASDAQ:HOOD) are up over 6% in pre-open Thursday trading after Bloomberg reported that the U.S. Securities and Exchange Commission (SEC) is very likely to allow controversial payment-for-order-flow (PFOF) deals.
The decision will mark a huge win for brokerages that generate revenue for processing rights. The official decision will likely be announced in the coming months, the Bloomberg report added.
PFOF allows brokerage firms to receive compensation for directing orders for trade execution to a particular market maker or exchange rather than to the New York Stock Exchange or Nasdaq.
PFOF is banned in some countries while this type of operation is common in the U.S. as it allows some brokers, like Robinhood or Charles Schwab (NYSE:SCHW), to generate a decent size of their revenues.
In addition to Robinhood stock, shares of Virtu Financial (NASDAQ:VIRT) climbed as much as 9% in pre-open trading on a Bloomberg report.
