Since 2012, the Justice Department has used the Firrea process to extract billions of dollars in settlements from banks and other firms for misconduct in the housing market before the financial crisis. Firrea charges underpinned most of the government case that resulted in a $5 billion settlement with Goldman Sachs last month, as well as a $25 billion settlement with Bank of America, a $13 billion settlement with JP Morgan Chase, and a $7 billion settlement with Citigroup, all connected to actions in the packaging and sale of mortgage backed securities.
As regulators have scrutinized the practice of paying for order flow, some prominent firms have changed their policies. Fidelity stopped accepting payment for many types of orders from market makers in early 2015. Schwab last year modified its policies on order payment to avoid any appearance of impropriety, according to a firm spokesperson.
Goldman Sachs exited the wholesale market making business altogether last summer. At the same time, it announced that the firm's dark pool was going to stop using the controversial slower data feed and rely instead solely on faster private market feeds.
Citadel has emerged as a champion of the industry. It has been the leading voice opposing SEC approval of a new stock exchange, IEX, owned by a consortium of buy-side investors. IEX plans to institute a short, 350-millionths-of-a-second delay in the execution of stock orders, in what it says is an effort to minimize the advantages of high-speed traders.
Citadel has waged a public campaign to block the new exchange. In public comments to the SEC, it has argued that the speed delay will lead to outdated share prices, harming investors.
KCG has stayed quiet on IEX's proposal.