Registered: Aug 2009
06-12-12 05:46 AM
I suggest something in the middle: Keep internal off-market crosses but only within the same entity, segregated accounts not counting as one entity, customer A and customer B would be two separate entities, no matter whether the broker holds customer A and B funds in the same segregated account structure. This will ensure that financial institutions can still cross trades internally without ever hitting the market but it would bring back more transparency to the market overall.
Quote from Occam:
I think the ulitmate solution is to ban internalization and payment-for-order-flow enitrely. Internalization and fragmentation are costing everyone, and it's a really opaque cost to the typical retail trader.
For brokers to call this "price improvement" is laughable. They are often "saving" the retail client 1 cent per order while screwing up the entire market's transparency, consistency, and fairness for a few more dollars through backend deals for the retail client's flow. Not to mention the fact that execution of these internalized orders is often horrible.