So instead, we had our old pal Erik Smolinski from Outlier Trading on for a wildly eclectic conversation about electric cars, abusive short selling, portfolio diversification, and more.

We covered a whole lot of ground, so if you want all of it, you’ll have to watch the whole episode. 

One of the highlights was a left turn into our favorite topic–Payment For Order Flow (PFOF) and internalization. 

Here’s a quick reminder in case you’ve forgotten, or never knew in the first place:

PFOF is an exceedingly common practice wherein your brokers get paid by wholesalers and exchanges to route your orders directly to them. So that means that they aren’t routing your orders to get you the best price. They’re routing your orders for the kickbacks.

Well, it’s not right, but it is true. Have you ever wondered why your brokerage is so excited to offer you commission-free trades?

As Erik explains, “One of the trickiest things for retail investors is, when you see zero commissions, you think, oh this is free for me.”

Of course, there are a few possible ways to interpret this arrangement. One possible way is to assume that your brokerage is just crazy generous. They think you’re going places, and they’d like to help you on your way by tossing a lifetime of freebies your way. 

Erik has a different interpretation. 

“It’s not free,” he says. “It will never be free.”

Now, on the one hand, says Erik, “it’s important to acknowledge that the markets objectively are better than they were 30 years ago.”

Sure, sure. 

As Dave notes, if brokers were more candid about where we’ve been, they’d probably tell you, “We’re ripping you off way less than we used to.” 

On the other hand, Erik says the fact that markets are still so far off from where they should be is “the ultimate kick in the nuts.”

It’s also an extremely costly kick in the nuts. Dave reminds us that trades which are routed based on PFOF rather than best execution are costing investors billions of dollars a year. 

“That’s a big number,” Dave reminds us. 

Well, it’s not as obvious as it sounds. It’s easy to take for granted how much we’re paying as investors just through sub-optimal trades. After all, the NYSE alone moves nearly $19 billion in volume every single day, so our piddling losses may not amount to much on a daily basis.

But if you knew how much you were losing in trade value over the long haul, you’d happily swap some sort of fee for a broker you could actually trust to find you quality execution. 

But odds are pretty low that brokers go back to the old commission-fee structure. Why?

I’m sure they have their reasons.

As always, the big question is, how do we, as everyday investors, navigate this reality? Well, paying close attention to which broker you choose and what their order routing practices are is an important starting point. At the same time, building a quality, diversified portfolio for long-term investing is more important than ever.

So what the hell does that even mean these days?

Well, diversification is actually quite personal. 

In a conversation that can itself be characterized by its topical diversification, we closed with a discussion on how our host and our favorite recurrent guest balance their own investments. 

What we learned is that two super smart guys with a lot of investment experience have two completely different philosophies about diversification. For proof, check the whole discussion between Dave and Erik on this week’s episode of Let’s Talk Markets Live.

And on April 11th, GIX reached a major milestone on the highway, earning SEC approval for an exchange license. GIX is now one step closer to launching its very own national securities exchange. 

Actually, yeah. It’s pretty hard to launch a new stock exchange. It’s even harder to create a whole new kind of marketplace–an exchange entirely dedicated to connecting green-minded investors and green-focused companies. 

With that in mind, we brought Dan and Charlie back to Let’s Talk Markets Live for a progress update. So now that GIX is on the cusp of launching, how is everybody feeling? 

“We wouldn’t recommend this to anybody,” says Charlie. “When we started this journey…we tried to think about any way to do this without becoming an exchange.”

But something soon became apparent. 

What followed was 18 months of drafting, redrafting, submitting, and waiting. Charlie points out that the 860-page Form 1 application had to be printed out, and weighed over 3 pounds.

“Not so green,” he conceded. 

Still, Charlie says, “working with the Commission has been incredible.”

He and Dan both confirm that they received tremendous support from the SEC, and that there were even people inside the agency that seemed to truly believe in their mission. 

So where exactly did that mission begin?

It all started because Charlie and I were doing consulting work and clients were asking about ESG,” says Dan. “The more we looked at it, the more we came back to some fundamental questions.”

Specifically, how does it make sense to cram three vast and separate areas of activity–Environmental, Social, and Governance–into a single buzz-wordy three-letter abbreviation?

And that’s not the only problem with existing ESG standards. In addition to reducing and smashing together an incredibly complex array of corporate activities, ESG standards are also voluntary, unregulated, and backwards looking. 

For instance, ESG reporting may tell you what a company has done in the past to shrink its carbon footprint, but it won’t tell you what it plans to do next.

As Dan points out, when it comes to investing, “it’s really about what a company is going to do in the future.”

Of course, even that presumes that we trust the ESG disclosures produced by publicly traded companies which, according to Dan, we don’t. 94% of investors think companies aren’t being totally honest about their efforts to become greener. 

This is where GIX comes in. 

GIX will be the first exchange in the U.S. dedicated to listing only companies that meet its Green Governance Standards. The objective behind GIX is to connect investors who believe in the practical and economic value of sustainability with companies that are innovating in this space.  

As Charlie explains it, “What we’re really trying to do is solve the trust problem. To me, that’s what the markets do.”

At their best and most innovative, the markets create a forum where companies can raise capital and investors can purchase a stake in companies they believe in. But in order for this to work, investors have to know that they can trust the information they receive. 

When it officially launches in the spring of 2026, GIX will give investors something to believe in. All of the companies that initially list on GIX will also be dually listed on major exchanges like the NYSE and Nasdaq. The hope is that eventually, companies will be able to list solely on GIX.

But for now, that dual listing provides investors with certain assurances. And increasingly, younger investors want assurances about how companies will approach sustainability issues going forward–both as a matter of corporate responsibility and long-term profitability. 

Charlie points out that “Climate risk is a business risk. Companies recognize this and are pivoting”.

GIX is in a position to capture this pivot and turn it into something valuable for us all. They’re shooting for an inaugural class of about 15 issuers, but ongoing talks with other interested issuers “have been very very positive,” says Dan.

Still, there’s a ton to get done before the spring. Dan says the process of navigating logistics, recruiting companies, and preparing to launch is like “trying to merge onto a 90 mile per hour highway.”

“Between now and next March,” says Dan, “Charlie and I won’t sleep.”