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Why did this get downvoted? Price improvement is strictly better than no price improvement, but there's no reason to expect that every brokerage will divide the
by tripletao 6y ago
Why did this get downvoted? Price improvement is strictly better than no price improvement, but there's no reason to expect that every brokerage will divide the economic benefit of their uninformed order flow between themselves (as payment for order flow) and their customers (as price improvement) in the same ratio.
I'd love to know how that split gets decided. I guess it's "as much as possible to the brokerage without looking so lopsided that someone writes an article about it", except at brokerages like IB that publish data on execution quality and try to market based on that? Do the contracts between the brokerages and the market makers specify the quality of execution in any detail, or is that just a long-term reputational thing?