Numbers at the end of sentences are used as footnotes in this article. To run down stats and quotes yourself, check the relevant sources at the bottom.

Is the stock market “rigged” against the average investor? This question has loomed large in recent years amid rapid changes in how trades are executed. In 2014, author Michael Lewis famously stated, “The stock market is rigged... for the benefit of a handful of insiders,” referring to advantages held by high-frequency traders and big Wall Street firms8. Such claims, while controversial, tapped into a growing unease about market fairness. Since then, a series of structural shifts and revelations have intensified these concerns.
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Today, more stock trading than ever occurs in opaque venues away from traditional exchanges. Complex arrangements like payment for order flow and algorithmic speed trading have become widespread, prompting questions about conflicts of interest and transparency. At the same time, regulators and market operators are grappling with how to ensure a level playing field. This report examines the evidence behind market “rigging” claims – focusing on off-exchange trading, dark pools, payment for order flow, and high-frequency trading – and how these developments are shaping market integrity.
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One of the most striking recent developments is the surge of trading happening outside “lit” exchanges. In January 2025, off-exchange venues (such as internalizers and alternative trading systems known as dark pools) handled about 51.8% of all U.S. stock trade volume1. This means the majority of stock trades bypassed public exchanges like the NYSE and Nasdaq, a first in market history. Throughout late 2024 and into 2025, hidden trading routinely exceeded 50% of volume for consecutive months1.
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Dark pools are private electronic networks where trades are executed anonymously, and internalizers are large wholesale dealers executing orders internally. These off-exchange channels have grown steadily over the past decade. Initially a way for institutional investors to trade large blocks discreetly, they now attract a significant share of all orders – including small retail trades routed to wholesalers. Analysts note this is not a temporary blip but potentially a permanent shift in market structure9. T
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The trend accelerated with the 2020–2021 retail trading boom: many zero-commission brokers send client orders to wholesale market makers (internalizers) rather than exchanges, and institutional traders increasingly utilize dark pools for liquidity. As a result, public exchanges’ share of trading has eroded to record lows.

​Why does this matter? When more activity migrates off-exchange, price discovery – the process of determining fair market prices – can be impacted. Public exchanges display bid/ask quotes that set the reference prices for stocks. If fewer trades occur on those lit venues, the price signals might be less robust. As market structure expert Larry Tabb cautioned, with so much volume hidden, “the fewer orders there are on-exchange competing to determine the best price… pricing on and off-exchange could get worse”10. In other words, heavy off-exchange trading could lead to wider spreads or less reliable prices for everyone.
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Another concern is transparency. Trades executed in dark environments are not visible to the broader market until after they’re done. Large investors may prefer this to avoid moving the price, but the opacity can disadvantage other participants who cannot see the full trading interest. Joe Saluzzi, an institutional broker, has described this evolution by saying “the bigger institutions seem to have a better experience” in these alternative venues, implying they can secure better pricing or liquidity than the public market offers. Meanwhile, smaller investors are left largely relying on whatever quotes the lit markets display.
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It’s worth noting that not all off-exchange trading is problematic. Internalizers (wholesale market makers like Citadel Securities or Virtu) typically execute retail orders at the best displayed price or better, per regulatory requirements. In fact, a significant portion of the recent off-exchange surge came from sub-$1 stocks heavily traded by retail investors, which wholesalers internalized1. When excluding those penny stocks, off-exchange trading was closer to 40% of volume1. This nuance suggests that the “majority hidden volume” headline is partly driven by a specific subset of trading. Nonetheless, the overall trend remains: a growing share of activity is happening in the shadows, which has prompted regulators to pay close attention.
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Payment for Order Flow (PFOF) is another controversial practice at the heart of the market structure debate. PFOF refers to the payments that retail brokers receive for routing their customers’ orders to specific market makers for execution. Instead of sending a client’s trade directly to the exchange, a broker can sell the order flow to a wholesale firm, which executes the trade and often earns a profit from the bid-ask spread or by matching with other flow. The broker, in turn, pockets a fee for this arrangement – allowing it to offer commission-free trading to customers. This model has become ubiquitous among U.S. retail brokerages, but it poses an inherent conflict-of-interest concern: the broker might be tempted to route orders based on the highest payment, rather than the best execution for the client.

The scale of PFOF in recent years is enormous. According to SEC disclosures, the 12 largest U.S. brokerages took in a combined $3.8 billion from PFOF in 20212. Industry leader Robinhood derived roughly $974 million of its revenue from order flow that year2, highlighting how dependent the “free trading” model is on these payments. Market makers like Citadel Securities, which execute a large chunk of retail trades, likewise spend billions on buying this flow. In fact, Citadel alone paid about $2.6 billion in PFOF over 2020 and 20213, representing around one-third of all retail order flow payments in the U.S. market for those years. Other big wholesalers such as Susquehanna (G1X) and Virtu Financial also spend heavily to attract order flow3.
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Why would a trading firm pay billions for the privilege of executing retail orders? The simple reason is that retail orders are often profitable to trade against. Retail investors generally aren’t as fast or informed as professional traders, so wholesalers can execute their orders at the NBBO (national best bid or offer) price or slightly better, and still profit from price improvements or matching orders internally. By internalizing these orders, wholesalers avoid competing with other traders on exchanges and can capture the spread more easily. The result is a highly concentrated market: as noted, only a half-dozen firms execute the vast majority of U.S. retail order flow, with Citadel handling about 40+% by itself4. This concentration and off-exchange internalization go hand-in-hand with the decline of lit exchange volume discussed earlier.
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The debate over PFOF centers on whether this setup harms or helps retail investors. Critics argue PFOF creates an inducement for brokers to send orders to the highest bidder rather than the venue offering the best price, potentially costing customers better execution. They also point out that when orders are internalized, they do not interact with the broader market, which could reduce overall competition for orders. In essence, the concern is that investors might consistently get the quoted price rather than any price improvement they might have gotten in a truly competitive auction. These worries led countries like the UK, Canada, and Australia to ban payment for order flow altogether due to conflict-of-interest issues2. The European Union has likewise agreed to prohibit PFOF across member states by 2026, viewing it as incompatible with transparent markets.
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On the other side, proponents of PFOF claim it has enabled the zero-commission revolution, greatly lowering trading costs for individuals. They argue that as long as trades are executed at the best available price (or better) as required by law, investors are not meaningfully harmed. In their view, the small “hidden” costs, if any, are outweighed by the benefit of no upfront commissions. Some studies find that overall trading costs for retail investors have indeed fallen in the PFOF era, though others note that retail orders often receive less price improvement per share than they might in a fully competitive market. The SEC’s own analysis in 2022 estimated that eliminating the current PFOF model in favor of an exchange auction system could save retail investors over a billion dollars annually in better execution – a figure contested by industry but indicative of the potential impact[^16].
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Given the controversy, U.S. regulators have been actively reviewing PFOF. SEC Chair Gary Gensler has repeatedly raised concerns, saying practices like PFOF “can raise real issues around conflicts of interest” and may create an “uneven field” between wholesalers and investors. In late 2022, the SEC proposed rule changes to inject more competition into retail trade execution – including possible standards for order-by-order auctions – though a direct ban of PFOF was not enacted at that time. The discussion remains heated, and brokerages have lobbied that curbing PFOF could lead to the return of trading commissions or reduced access for small investors. As of now, PFOF persists in the U.S., but under greater scrutiny than ever.
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Another pillar of the market rigging debate is high-frequency trading (HFT) – ultra-fast, algorithmic trading executed by sophisticated firms using powerful computers and co-location at exchanges. HFT firms engage in strategies that often seek to profit from tiny price discrepancies or momentary imbalances in order flow, sometimes submitting and canceling thousands of orders per second. Their presence exploded in the late 2000s, and at one point HFT was responsible for the majority of stock market volume. During 2009–2010, more than 60% of U.S. equity trading volume was attributed to HFT strategies5. While that share declined slightly in subsequent years, HFT still accounts for over half of trading activity by 20235. In other words, algorithmic traders remain extremely active and influential in setting prices and absorbing liquidity.
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The concern with HFT from a fairness perspective is that it can create a speed-driven arms race where those with the fastest technology win at everyone else’s expense. These firms spend millions on microwave data links, fiber optic routes, and advanced algorithms to shave microseconds off their trade times. Being faster than the competition means an HFT can, for example, detect an incoming large buy order and quickly buy up shares on other exchanges, causing the price to rise, then resell to the original buyer at a higher price. This practice, known as latency arbitrage, was a key issue highlighted in Michael Lewis’s book Flash Boys. It’s essentially legal “front-running” – capitalizing on the slight time advantage to trade before others can. While HFTs provide a lot of liquidity and often tighten bid-ask spreads, critics say the profits from these tactics come at the expense of slower investors (including institutional investors and retail traders). The prey might be unaware they are transacting at prices that have subtly moved against them due to HFT activity.

Regulators and researchers have studied HFT impacts extensively. Some findings suggest HFT generally improves market quality by adding liquidity and making markets more efficient. However, there is also evidence that certain HFT strategies amplify volatility or hurt investor outcomes during specific moments (e.g. the “Flash Crash” of 2010 was tied in part to algorithmic trading gone awry).
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Importantly, HFT firms’ activities are typically within the bounds of current regulations, but the question is whether the rules themselves need updating to prevent abuses. The SEC, FBI, and other authorities launched investigations into HFT after the Flash Boys revelations, examining whether markets were “an uneven playing field” as Lewis alleged8. No broad unlawful conduct was identified; instead, the focus shifted to structural reforms like introducing speed bumps. For instance, the IEX Exchange was created in 2016 with a built-in 350-microsecond delay on all orders, explicitly to neutralize the speed advantage of HFT and protect investors from being “picked off.” IEX’s model proved that some market participants were willing to trade slightly slower in exchange for fairer execution. Several other exchanges have since adopted similar mechanisms or small delays to curb the fastest arbitrage.
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Despite these measures, the fundamental dynamic remains: speed is king in modern markets, and those who can trade in millionths of a second wield an outsized advantage. Whether this constitutes “rigging” is a matter of perspective. Industry defenders argue that anyone can invest in better technology, and that HFT firms simply earn profits by providing valuable liquidity and taking on risk. Detractors counter that the playing field between a regular investor (even a typical fund manager) and a dedicated HFT firm is so unequal that it undermines confidence in the market.
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As one veteran trader quipped, “It’s like knowing the result of a horse race a split-second before everyone else – you’ll win every time.” Indeed, public sentiment has tilted toward skepticism: by 2021, a majority of investors agreed the market structure favors insiders with sophisticated tools6. The perception that HFT and similar practices unfairly tilt the game can erode trust, regardless of academic debates about market quality.
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Not all market rigging concerns are about legal but contentious practices. There have also been outright illegal schemes that reinforce worries about fairness. In recent years, regulators have cracked down on “spoofing” and other forms of manipulation in various markets. Spoofing involves placing fake orders with the intent to cancel them, in order to trick other traders about supply or demand and move prices. This is a crime under U.S. law, and several high-profile cases underscore that manipulation is not just theoretical.
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For example, in 2020 JPMorgan Chase paid a record $920 million fine to settle charges that its traders manipulated prices in futures markets by spoofing orders over an eight-year period7. The bank admitted wrongdoing in what authorities called a “landmark” case of illegal market manipulation7. In another case, a lone trader in the UK was convicted for contributing to the 2010 Flash Crash by using spoofing tactics in E-mini futures. These enforcement actions show that regulators are willing to pursue those who deliberately distort markets.
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While such prosecutions target individual bad actors, their existence feeds a broader narrative that financial markets may be rigged or unfair. Every headline of a trading firm fined for deceptive practices chips away at investor confidence. It also highlights the importance of strong surveillance and regulation – markets only function well if participants believe everyone must play by the same rules. The fact that some traders were able to manipulate prices for years (as in the JPMorgan case) suggests that oversight can lag behind innovation in trading tactics. Regulators have since upgraded monitoring systems and imposed new rules (like the 2010 Dodd-Frank Act provisions explicitly outlawing spoofing) to better police such behavior.
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Concerns over market rigging have prompted a multi-pronged response from regulators, both in the U.S. and internationally. Transparency and fairness have become top regulatory priorities, aiming to restore trust in the equity market’s integrity:

The balancing act for regulators is to encourage innovation and liquidity, while preventing exploitative practices that undermine confidence. It’s a challenging task – changes to market rules often have unintended consequences, and industry pushback is strong whenever core profit models (like PFOF or HFT) are threatened.
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The evidence examined in this report paints a picture of a stock market that, while highly efficient in many ways, has also become increasingly fragmented and complex, with a tilt that often favors those with the most sophisticated tools or private channels. The fact that over half of U.S. trading volume now takes place off traditional exchanges1 is emblematic of this new landscape.
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For investors, these developments can be worrying: when trades happen in the dark, or your broker sells your orders to a third party, or lightning-fast traders can potentially profit from your slower reflexes, it’s easy to feel the odds are stacked against you. Taking action is a must.
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