Broker colocation and the execution costs of customer and proprietary orders
- Colocation services offered by stock exchanges enable market participants to achieve execution costs for large orders that are substantially lower and less sensitive to transacting against high-frequency traders. However, these benefits manifest only for orders executed on the colocated brokers' own behalf, whereas customers' order execution costs are substantially higher. Analyses of individual order executions indicate that customer orders originating from colocated brokers are less actively monitored and achieve inferior execution quality. This suggests that brokers do not make effective use of their technology, possibly due to agency frictions or poor algorithm selection and parameter choice by customers.
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| Verfasserangaben: | Satchit SagadeGND, Stefan ScharnowskiORCiDGND, Christian WestheideGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-691088 |
| URL: | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4289346 |
| DOI: | https://doi.org/10.2139/ssrn.4289346 |
| Titel des übergeordneten Werkes (Englisch): | SAFE working paper ; No. 366 |
| Schriftenreihe (Bandnummer): | SAFE working paper (366) |
| Verlag: | SAFE |
| Verlagsort: | Frankfurt am Main |
| Dokumentart: | Arbeitspapier |
| Sprache: | Englisch |
| Jahr der Fertigstellung: | 2022 |
| Jahr der Erstveröffentlichung: | 2022 |
| Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Datum der Freischaltung: | 21.12.2022 |
| Freies Schlagwort / Tag: | Broker; Colocation; Execution Cost; High-Frequency Trading; Institutional Investor |
| Auflage: | This version: October 14, 2022 |
| Seitenzahl: | 67 |
| Bemerkung: | The authors gratefully acknowledge financial support from the Research Center SAFE, funded by the State of Hessen research initiative LOEWE. |
| Bemerkung: | An earlier version of this paper appeared as chapter 2 of Stefan Scharnowski’s doctoral dissertation at the University of Mannheim. |
| Institute: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| JEL-Klassifikation: | G Financial Economics / G1 General Financial Markets / G10 General |
| G Financial Economics / G1 General Financial Markets / G14 Information and Market Efficiency; Event Studies | |
| G Financial Economics / G1 General Financial Markets / G15 International Financial Markets | |
| Sammlungen: | Universitätspublikationen |
| Lizenz (Deutsch): |  Deutsches Urheberrecht |
