Wholesaler Execution Quality

60 Pages Posted: 28 Dec 2022 Last revised: 19 Dec 2023

See all articles by Robert H. Battalio

Robert H. Battalio

University of Notre Dame - Department of Finance

Robert H. Jennings

Indiana University - Kelley School of Business - Department of Finance

Date Written: December 18, 2023

Abstract

We obtain all marketable orders routed to one or more wholesaler(s) in May 2022 to examine wholesaler execution quality in isolation and relative to that available on exchanges in similar market conditions. We find substantially better wholesaler execution quality than that documented in SEC mandated Rule 605 reports because we consider short sales and odd lot orders and account for size improvement provided to orders that outsize the depth available at the national best quotes. We conclude with a near neighbor order analysis and find that, on average, wholesaler execution quality is consistently superior to that available on exchanges in similar market conditions – winning/tying 90% of the comparisons.

Keywords: Payment for Order Flow, Execution Quality, Order Routing, Liquidity

JEL Classification: G20, G24, G28

Suggested Citation

Battalio, Robert H. and Jennings, Robert H., Wholesaler Execution Quality (December 18, 2023). Available at SSRN: https://ssrn.com/abstract=4304124 or http://dx.doi.org/10.2139/ssrn.4304124

Robert H. Battalio (Contact Author)

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States
574-631-9428 (Phone)
574-631-5255 (Fax)

Robert H. Jennings

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-2696 (Phone)
812-855-5875 (Fax)

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