Institutional Order Handling and Broker-Affiliated Trading Venues

Performance of institutional trading desks: An analysis of persistence in trading costs

Amber Anand, Mehrdad Samadi, Jonathan Sokobin and Kumar Venkataraman

The Review of Financial Studies, 2021, vol. 34, issue 7, 3364-3402

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 for ATS 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.

Keywords: G10; G20 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (16)

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