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You are correct for equities but see here: https://personal.vanguard.com/pdf/v719.pdf https://personal.vanguard.com/pdf/v719.pdf > Vanguard brokerage receives

• kasey_junk 10y ago
  Yeah, what I found most interesting though is that even though they aren't being compensated for it, they are still using the exact same internalizers as brokerages that are. This is at least evidence that Vanguard (the brokerage with the best reputation for consumers) thinks that the internalizers are a better way to route (securities) than the other options on their own merits.
  • tcoppi 10y ago
    Vanguard is so large that I could imagine that re-balancing their portfolios probably adversely selects even the internalizers so heavily that they won't pay for it, but at the same time gives Vanguard better execution than they could hope to achieve on their own. An interesting situation.
    • kasey_junk 10y ago
      But this is for their "brokerage" service, not their mutual fund arm. Vanguard being a big brokerage should mean its less directed and more diverse (and therefore more valuable) than a small brokerage. Though Vanguard probably (I don't know this) also uses at least one of these firms for their execution services on the mutual fund side as well, if only because that is the cheapest way to get good execution rates. I wouldn't be surprised if they pay for this, not get paid for it though.