The retail execution quality landscape

Anne Haubo Dyhrberg, Andriy Shkilko and Ingrid M. Werner

Journal of Financial Economics, 2025, vol. 168, issue C

Abstract: We demonstrate that off-exchange (wholesaler) executions provide significant cost savings to retail investors. Wholesaler concentration has raised regulatory concerns; however, we show that the largest wholesalers offer the lowest costs due to economies of scale. The entry of a new large wholesaler reduces incumbent scale economies, resulting in higher execution costs. Most retail brokers route to multiple wholesalers and actively monitor their performance, rewarding those offering lower execution costs with more volume. While retail investors benefit from the current landscape across all stocks, those trading small stocks benefit the most.

Keywords: Retail trading; Wholesalers; Execution quality (search for similar items in EconPapers)
JEL-codes: G20 G24 G28 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:168:y:2025:i:c:s0304405x25000595

DOI: 10.1016/j.jfineco.2025.104051

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