DMA vs PFOF — Worked Example in Cents

[NYC88]

This is not a morality play. It's arithmetic for scalpers.

**PFOF-style retail routing** can look "commission free" while your **effective** cost sits in the fill. **DMA / direct-style** access (where available) can show commissions but different fill behavior. Exact mechanics vary — measure *your* path. I've argued labels. Labels don't pay. Cents do.

### Worked example (illustrative — not your numbers)

Assume you scalp 1,000 shares, round trip, twice in a morning.

**Path A — "zero commission," worse fills**

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Avg adverse slip vs mid: 1.5¢ / share / side
Round trip slip cost: 1.5¢ × 2 × 1000 = $30 per round trip
× 2 RTs = $60
Commission: $0
Effective: ~$60

**Path B — commission + tighter fills**

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Commission: $0.005 / share / side → $0.005 × 2 × 1000 = $10 per RT
× 2 RTs = $20
Avg adverse slip vs mid: 0.4¢ / side → 0.4¢ × 2 × 1000 = $8 per RT
× 2 = $16
Effective: ~$36

Path B wins **in this toy example**. Flip the slip numbers and Path A can win. That is the point: **your fill CSV decides**, not the marketing page.

### Sensitivity table (same 2 RTs × 1000 sh)

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slip/side | zero-comm path cost | 0.5¢/sh commission path*
0.5¢      | $20                 | $20 + $20 = $40
1.0¢      | $40                 | $40 + $20 = $60
1.5¢      | $60                 | $60 + $20 = $80
*commission path also has its own slip — replace with measured

Build the table with **measured** slip. Fake numbers above are teaching tools only.

### What to do

1. Log slips for 2 weeks on current broker.
2. If you have another route/account type, A/B at **micro size**.
3. Include locate fees / platform fees if relevant.
4. Stop arguing labels (`PFOF`/`DMA`) without cents attached.

Broker features change. Account types differ. This post teaches measurement, not a recommendation of a named firm.

What effective ¢/share are you seeing after two weeks of logging?
Anyone A/B'd two routes at micro size with a real sheet?
Do you include locate / platform fees in the effective cost, or forget them?
Where does your style sit — more sensitive to commission, or to slip?

[Fairman]

Arithmetic over morality — right frame for scalpers.

PFOF-style retail routing can look "commission free" while effective cost sits in the fill. DMA-style access (where available) can show commissions with different fill behavior. Exact mechanics vary by broker, name, and time of day — measure your path.

I keep a simple weekly sheet: mid at send versus fill in cents, by ticker and time-of-day bucket (open versus midday). The open is where the tax usually hides on US equities. If a venue can't or won't give fill-quality detail, that absence is information.

Your worked-example shape is what I show newer traders: same 1,000-share round trips, different effective cents. Zero commission with 1.5¢ adverse per side can lose to a small commission with tighter fills. Labels don't pay. Cents do.

Don't pick a broker from a marketing PDF. Pick from two weeks of your own mid-to-fill log on the names you actually scalp.

Diagram: Path A vs Path B illustrative math.