Order Routing and Market Quality: Who Benefits From Internalization?
研究了零售订单内部化对零售交易者的影响，发现当流动性提供者风险厌恶时，将可市价订单路由给批发商对所有零售交易者更有利，且多数流动性指标不受市场设计影响。
ABSTRACT Does retail order internalization benefit (via price improvement) or harm (via reduced liquidity) retail traders? To answer this question, we compare two market designs that differ in their mode of liquidity provision: In the setting capturing retail order internalization, liquidity is provided by market makers (wholesalers) competing for the retail order flow in a Bertrand fashion. Instead, in the open exchange setting, price‐taking competitive agents act as liquidity providers. We discover that, when liquidity providers are risk averse, routing of marketable orders to wholesalers is preferred by all retail traders: informed, uninformed, and noise. Furthermore, most measures of liquidity are unaffected by the market design. We also identify a universal parameter that allows comparison of market liquidity, profit and value of information across different markets.