We show that wholesalers internalize unbalanced amounts of retail order flow to provide liquidity to institutional investors. The Tick Size Pilot highlights how wholesaler incentives affect the magnitude and composition of internalized retail trade imbalances (Mroib, Boehmer et al.\ 2021). Large...

The recent absence of a discernible liquidity premium in cross-sectional stock returns despite non-trivial trade execution costs is a puzzle. We resolve this puzzle using a proxy for institutional trading costs that exploits the unique institutional features of modern U.S. equity markets....