Schwab Will Resume Brokerage Payments

Charles Schwab Corp., showered with favorable publicity after saying it would cease cash payments to attract stock orders from other brokerages, said Friday it will continue making those payments after all.

Schwab, based in San Francisco, said some of its customers threatened to take their business elsewhere if it discontinued the controversial payments, which some market experts call “hidden kickbacks.”

Smaller brokerages often use the trading operations of giant firms like Schwab to execute customer orders. Schwab and others typically pay a few pennies a share to the smaller brokerages to attract such orders, mostly executed on the Nasdaq Stock Market but on other exchanges as well.

While legal, the so-called “payment for order flow” arrangements mean a customer order isn’t exposed to the broader market, where it might get a better price.

Schwab spokesman Mark Thompson said the company’s brokerage unit, Mayer & Schweitzer Inc., eventually plans to do away with payment for order flow, but it can’t do it as quickly as it had hoped.