We directly compare retail investor execution costs with exchange execution costs. We find off-exchange retail trades execute at lower effective spreads than comparable exchange trades, primarily due to the uninformed nature of retail trades. These results hold when payment for order flow (PFOF)...

Stock exchange operators compete for order flow by setting "make" fees for limit orders and "take" fees for market orders. When traders quote continuous prices, they can choose prices that perfectly neutralize any fee division, and traders stream to the exchange with the lowest total fee. The...

Mutual fund families are increasingly assigning traders to manage corporate bond mutual funds. Using this setting to study the role of traders in investment management, we document that trader managers identify and exploit short-term trading opportunities at lower transaction costs. These skills...

Using trade-level data, we study whether brokers play a role in spreading order flow information. We focus on large portfolio liquidations, which result in temporary drops in stock prices, and identify the brokers that intermediate these trades. We show that these brokers' best clients tend to...

This paper links the recent fragmentation in equity trading to high frequency traders (HFTs). It shows how the success of a new market, Chi-X, critically depended on the participation of a large HFT who acts as a modern market-maker. The HFT, in turn, benefits from low fees in the entrant...

Using data with trader identities for all transactions in SENSEX-index stocks on the Bombay Stock Exchange over seven years, we identify individual day traders (IDT) to be “noise traders”, who play an important role in market microstructure models in the literature.IDT contribute 10% to...

Financial regulations and clientele segmentation explain the proliferation of order types on stock exchanges. Plain market and limit orders lose money, indicating that informed traders use complex orders. Fifty-seven percent of trading volume comes from non-routable orders, which are designed to...