Institutional Order Handling and Broker-Affiliated Trading Venues

Publication Date

3-11-2019

Abstract

Using detailed order handling data over the life of 330 million institutional orders, we study whether order routing by brokers to Alternative Trading Systems (ATSs) that they own affects execution quality. In a multivariate regression specification that controls for stock attributes, order characteristics and market conditions, orders handled by brokers with high affiliated ATS routing are associated with lower fill rates. Trading costs based on the implementation shortfall approach are higher when clients select a broker with high affiliated ATS routing. Broker outcomes are highly persistent suggesting that improved disclosures on order handling could help institutional clients with broker selection.

Document Type

Article

Keywords

broker, intermediation, agency, venue, liquidity, trading, fund

DOI

10.2139/ssrn.3338129

Source

SMU Cox: Finance (Topic)

Language

English

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