The PFOF Ban Is Coming in June 2026 — What Every European Retail Investor Needs to Know

If you use a European discount broker — Degiro, Trade Republic, Scalable Capital, or similar — there's a regulatory change heading your way that could alter how your trades are executed and how your broker makes money. The EU's ban on payment for order flow (PFOF) is set to take effect in June 2026, and most retail investors have no idea it's coming.

This article explains what PFOF is, why the EU is banning it, what it means for your broker, and — most importantly — what it means for you as an investor.

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What Is Payment for Order Flow?

Payment for order flow is an arrangement where a broker routes your buy or sell orders to a specific market maker, and in return the market maker pays the broker a small fee per trade. The broker passes your order along; the market maker executes it and pockets the spread — the tiny gap between the price at which they buy and the price at which they sell.

In plain terms: when you click "Buy 10 shares of ASML," your broker doesn't necessarily send that order to the stock exchange. Instead, it may sell that order to a third-party firm — often a high-frequency trading shop — who fills it themselves. The broker gets paid. The HFT firm profits from the spread. You get your shares, and you may or may not have gotten the best available price.

PFOF became the business model that made "zero-commission trading" possible in the US (Robinhood famously used it to offer free trades). The revenue from selling order flow subsidises the platform. European brokers adopted a version of it too, though within tighter MiFID II constraints.

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Why Is the EU Banning It?

The European Securities and Markets Authority (ESMA) and EU legislators concluded that PFOF creates a structural conflict of interest: brokers are financially incentivised to route your orders to whoever pays them the most, not to whoever executes your trades at the best price. This conflicts with the best-execution obligations brokers owe their clients under MiFID II.

The specific concerns:

• Price quality: Market makers who pay for order flow often offer prices that are marginally worse than the lit exchange price, capturing the spread as profit. Over thousands of trades, this erodes investor returns.
• Transparency: Retail investors generally have no visibility into how their orders are routed or what kickback the broker receives.
• Market structure: Internalising order flow — executing trades off-exchange — reduces the volume of orders reaching public markets, which can widen spreads for everyone and reduce price discovery.

The EU's revised MiFID II framework (part of the Capital Markets Union reforms) introduced the PFOF ban as part of a broader push to protect retail investors and improve the quality of European equity markets. The prohibition was agreed at the legislative level in 2023 and a phased implementation schedule was set — with full prohibition for EU-licensed brokers taking effect in June 2026.

Key date: After June 2026, EU-regulated brokers may no longer receive payments from third parties (market makers) for routing your orders to them.

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Which Brokers Are Affected?

The ban applies to brokers regulated in the EU. If your broker is licensed in an EU member state, it must comply. That covers:

• Degiro (regulated in the Netherlands under DNB/AFM)
• Trade Republic (German BaFin licence)
• Scalable Capital (BaFin)
• Flatex (BaFin)
• BPER Banca, Directa and other Italian platforms
• Most other EU-passport brokers

Not affected (at least not directly):

• Interactive Brokers — IBKR charges commissions and does not rely on PFOF as a revenue model
• eToro — operates a different model (CFDs and spread-based revenue), though EU regulation still applies
• Brokers licensed in the UK post-Brexit — the FCA has its own stance and has not adopted the same prohibition

If you use a UK-based broker, you are outside the EU's jurisdiction. But the FCA has signalled it is monitoring the issue closely, and further UK reform is possible.

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How Do Brokers Like Degiro Make Money Without PFOF?

This is the central question — and the honest answer is that brokers haven't fully told us yet. But there are a few likely paths:

1. Introducing or raising commissions

Zero-commission trading was always cross-subsidised. Without PFOF revenue, brokers must find another source. The most straightforward option is charging per-trade commissions. Degiro already charges a small fee (typically €1–2 plus a small percentage for non-core exchanges), so their model isn't purely zero-commission. But expect fee schedules to be reviewed.

2. Wider spreads or different order routing

Even without explicit payments, brokers can still choose which venues they route to. The ban targets payments to brokers, not the routing relationship itself. Some brokers may move to smart order routing across lit markets, which should benefit execution quality. Others may internalise trades through affiliated entities in ways that stop short of the banned practice but still raise questions.

3. Premium tiers and subscriptions

Trade Republic and Scalable Capital already offer subscription models (flat monthly fees for unlimited trading). This revenue model survives the PFOF ban entirely. Expect more brokers to push users toward subscription plans.

4. Interest on cash balances and securities lending

Brokers earn interest on uninvested cash held in client accounts (unless they pass that interest on to clients). Securities lending — lending your shares to short sellers and keeping a cut — is another revenue stream that is unaffected by the PFOF ban.

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What Does This Mean for Your Trades?

In theory, the PFOF ban should improve your execution quality. Orders routed to lit exchanges rather than internalised with market makers should reflect the true market price more accurately. The EU's stated goal is precisely this: better prices for retail investors.

In practice, the improvement may be modest and difficult to notice on individual trades. The spreads you lose to market makers on a €500 trade might amount to a few cents. But across thousands of retail investors making millions of trades, the aggregate effect on market quality is significant — and the compounding effect on your returns over years is not trivial.

What you should watch for after June 2026:

• Commission changes: If your broker announces fee changes in Q1–Q2 2026, this is likely the reason. Compare the new fee structure to what you were implicitly paying via inferior execution before.
• Execution quality disclosures: MiFID II already requires brokers to publish annual best-execution reports (RTS 27 and RTS 28 data). These will become more meaningful post-PFOF. Check your broker's investor relations page.
• New account tiers: Watch for brokers restructuring their free vs paid tiers around the deadline.

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Should You Switch Brokers?

Not necessarily — and definitely not in a panic. The right response is to understand your current broker's cost structure and compare it honestly to alternatives.

Questions to ask about your broker:

1. What is their stated revenue model today?
2. Have they published anything about how they will comply with the PFOF ban?
3. What do their best-execution disclosures show about where your orders are currently routed?
4. What commissions or fees will apply post-June 2026?

When switching might make sense:

• Your broker's post-ban fee schedule makes it materially more expensive than a commission-based alternative like Interactive Brokers for your trading volume.
• You trade frequently enough that execution quality differences start to matter (active traders are more sensitive to this than long-term buy-and-hold investors).
• Your broker's communications around the change are opaque or evasive — that's a culture signal worth noting.

When switching probably doesn't make sense:

• You are a long-term passive investor making a few trades per year. The per-trade execution quality difference is negligible for you.
• The hassle of transferring your portfolio (including in-specie transfers of shares) outweighs any marginal fee saving.
• Your broker has already clearly communicated their post-ban model and it is reasonable.

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For Degiro Users Specifically

Degiro has operated a hybrid model: they charge small commissions per trade and have used order routing arrangements that include elements of PFOF (particularly for their "free" ETF programme). Post-ban, expect:

• The free ETF programme to be restructured or discontinued in its current form (the economics that make it free rely partly on favourable routing arrangements).
• Possible revision of the connectivity fee or per-trade pricing.
• Greater routing to lit European exchanges (Euronext, Xetra, etc.) rather than off-exchange internalisation.

Degiro's parent company flatexDEGIRO has been actively communicating with regulators and has the operational scale to adapt. They are unlikely to exit the market or dramatically worsen their offering — but some repricing is probable.

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Portfolio Tracking in a Changing Landscape

Regulatory changes like the PFOF ban are a reminder that the cost of investing isn't always visible on your statement. Hidden in execution quality, spread capture, and order routing are real costs that affect your long-term returns.

This is exactly why tracking your portfolio carefully matters. A good portfolio tracker lets you:

• See your true cost basis across all transactions, including fees
• Monitor your actual performance — not just nominal return but net-of-costs return
• Compare across brokers if you hold accounts at multiple institutions
• Spot drift in your allocation over time, so you rebalance on your own terms rather than reacting to market noise

Folia is built for this. Whether you're on Degiro or another broker, import your transaction history and get a clear, uncluttered picture of where you stand — before and after regulatory changes reshape the industry.

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Timeline: What to Expect

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Key Takeaways

• PFOF is being banned in the EU from June 2026. If you use an EU-regulated broker, this will affect how your trades are executed and possibly how much you pay.
• The ban is designed to help you — better order routing should mean fairer prices. But the transition may involve fee changes that offset some of that benefit.
• Watch your broker's communications in the coming months. Fee restructuring announcements, new account tiers, and execution policy updates are all signals of how they're adapting.
• Long-term buy-and-hold investors are least affected. If you're making a few ETF purchases per month, the execution quality difference is small. The main risk is a fee increase that you should shop around to compare.
• Active traders should pay attention. Higher trade frequency means execution quality and per-trade fees matter more. Run the numbers on your current broker vs alternatives once their post-ban pricing is announced.
• Don't panic-switch. Regulatory changes create noise. Make decisions based on actual announced fee schedules, not speculation.

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