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They Threw Me In The Shark Tank Paulie! (Internalization and Sub-Penny Pricing)

24

July, 2012

Price-improvement. Ah yes – many of us have been conditioned to believe that the small executions with the many decimal places save us money. Many of you even receive emails from your execution vendors/brokers that break out the “savings” for you each day on trades executed through them. In our Friday note to you we detailed how Fred and Ethel, if they saved a tenth of a penny on a trade, would save a whole whopping pair of dimes on  a $5,000 purchase. To put their savings in perspective,

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One Response to “They Threw Me In The Shark Tank Paulie! (Internalization and Sub-Penny Pricing)”

  1. antongolub
    July 24th, 2012 at 11:23 am
    avatar

    Hi

    Guys at BNP Paribas did a similar study while ago: Sub Penny Trading in US Equity Markets (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1651201), of course with similar conclusion.
    You should separate midpoint execution, and when they actually “queue jump” the NBBO. Though I notice many times ADF/TRF reporting lags behind the market (I get the data from Nanex’s NxCore), hence it would be difficult to be very precise about it. Also, please mention what is the time period considered in the analysis.

    Love the blog.

    antonGolub


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