Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
Please note that all times are shown in the time zone of the conference. The current conference time is: 9th June 2024, 02:36:22am EDT
Session Chair: Briana Chang, UW Madison Discussant: Mao Ye, Cornell University
Location:Room 619
Presentations
Who Is Minding the Store? Order Routing and Competition in Retail Trade Execution
Xing Huang1, Philippe Jorion2, Mina Lee3, Christopher Schwarz2
1Washington University in St. Louis; 2UC Irvine; 3Federal Reserve Board
Using 150,000 actual trades, we examine competition among wholesalers, to which brokers route orders from their retail investors. We find that each broker's wholesaler execution prices have substantial dispersion and are persistent. However, most brokers do not adjust their routing even when they are sending more orders to higher-cost wholesalers. We also observe that the entry of a new wholesaler improves other wholesalers' execution quality. Finally, we present a stylized model that illustrates how brokers’ limited response to execution allows wholesalers to exercise their market power. Overall, our findings are inconsistent with perfect competition.