Institutional Order Handling and Broker-Affiliated Trading Venues

Amber Anand, Mehrdad Samadi, Jonathan Sokobin, Kumar Venkataraman

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Using detailed order handling data, we find that institutional brokers who route more orders to affiliated alternative trading systems (ATSs) are associated with lower execution quality (i.e., lower fill rates and higher implementation shortfall costs). To separate clients' preference for ATSs from brokers' routing decisions, we confirm these results for orders where brokers have more order handling discretion, matched broker analysis that accounts forATS usage, matched child orders that account for client intent, and based on an exogenous constraint on ATS venue choice. Our results suggest that increased transparency of order routing practices will improve execution quality

Original languageEnglish (US)
Pages (from-to)3364-3402
Number of pages39
JournalReview of Financial Studies
Volume34
Issue number7
DOIs
StatePublished - Jul 1 2021

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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