We develop a dynamic model of price competition in broker and dealer markets. Competing market makers quote bid-ask spreads, and competing brokers choose commissions to be paid by an investor. Investors, who submit either market or limit orders, choose a broker to minimize total transaction costs. We model this as an infinitely-repeated game. With no payment for order flow, there exist equilibria in which brokers and market makers earn positive profits. There is also an equilibrium in which they earn zero profits. With payment for order flow, spreads widen to more than compensate for this payment. Hence, while positive profit equilibria continue to exist, there is no equilibrium in which market makers earn zero profits. While brokerage commissions for market orders can fall, the total transactions cost to submitting a market order remains positive. Hence, payment for order flow redistributes welfare from traders who demand liquidity to those who supply it. We determine the level of payment for order flow in equilibrium, and provide some comparative statics.