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The Retail Execution Quality Landscape

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  • Dyhrberg, Anne Haubo
  • Shkilko, Andriy
  • Werner, Ingrid

Abstract

We show that off-exchange (wholesaler) executions provide significant cost savings to retail investors. Despite industry concentration, the largest wholesalers offer the lowest costs, consistent with economies of scale. Most retail brokers route to several wholesalers and closely monitor wholesaler performance, rewarding those offering low execution costs with more order flow. The entry of a new large wholesaler results in a reduction of scale economies, followed by an increase in execution costs. While retail investors benefit from the current landscape across all stocks, execution quality in small stocks where retail investors are especially active sees the greatest improvement.

Suggested Citation

  • Dyhrberg, Anne Haubo & Shkilko, Andriy & Werner, Ingrid, 2024. "The Retail Execution Quality Landscape," CEPR Discussion Papers 19364, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19364
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    More about this item

    Keywords

    Wholesalers;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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