Private investors and the emergence of neo-brokers: Do investors pay higher execution prices at a neo-broker with payment-for-order-flow?

Steffen Meyer, Charline Uhr and Lutz Johanning

Finance Research Letters, 2025, vol. 80, issue C

Abstract: We investigate the implicit trading costs of neo-broker clients using trading data of 100,000 clients at Trade Republic. Comparing execution prices at the neo-broker to Germany's reference market (Xetra) order book prices, we show that routing orders to one pre-specified trading venue leads to <1 % of transactions being executed at prices worse than on the reference market. In terms of total trading costs, customers benefit from this new trading venue because the trade-related costs other than the spread (explicit costs) are favorable compared to traditional online brokerages.

Keywords: Household finance; Individual investor; Fintech; Neo-broker; Trading costs; Payment-for-order-flow; Inducements (search for similar items in EconPapers)
JEL-codes: D14 D18 G24 G28 O33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006774

DOI: 10.1016/j.frl.2025.107417

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