4 ms·
Why don't brokers place orders directly with the exchange? Is it more efficient to do it via market makers?
by blueblisters 6y ago
Why don't brokers place orders directly with the exchange? Is it more efficient to do it via market makers?
- tptacek 6y ago(1) There are lots of different exchanges and trading venues, not just one. (2) Electronic market makers have expertise in order execution and have invested huge amounts of money in software platforms to automate it, which they're effectively renting out to broker-dealers. (3) Some of these firms have other sources of inventory they can clear trades against. There are probably 10 other more important reasons I just don't know about. What I think it comes down to is that order execution is a big job, and being able to effectively answer the phone and run the right billboards and TV ads is also a big job, and firms like Citadel and Virtu are good at the former and firms like Ameritrade are good at the latter.