Broker Routing Decisions in Limit Order Markets
David A. Cimon
The primary focus of this paper is to study conflict of interest in the brokerage market. Brokers face a conflict of interest when the commissions they receive from investors differ from the costs imposed by different trading venues. I construct a model of limit order trading in which brokers serve as agents for investors who wish to access equity markets. I find that brokers preferentially route marketable orders to venues with lower liquidity demand fees,...
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