The laws governing exchanges are meant to ensure that the rebates do not result in customers getting a worse price for their stocks. If an exchange has the best offer at a given moment, other exchanges have to send orders there.
But in todayâs high-speed fragmented markets, there are several instances in which this rule does not protect investors. For instance, if a broker sends the first 100 shares of an order to the exchange with the best price, the broker can send the rest of the shares to another exchange where it will receive a larger rebate. Several academic studies have found that the cost of executing trades is at a record low. But Matt Samelson, the founder of Woodbine, said these calculations have not factored in the âhidden pricesâ that can be incurred when investors donât get the best price.
http://www.nytimes.com/2012/05/07/b...a-conflict-of-interest.html?pagewanted=1&_r=1
But in todayâs high-speed fragmented markets, there are several instances in which this rule does not protect investors. For instance, if a broker sends the first 100 shares of an order to the exchange with the best price, the broker can send the rest of the shares to another exchange where it will receive a larger rebate. Several academic studies have found that the cost of executing trades is at a record low. But Matt Samelson, the founder of Woodbine, said these calculations have not factored in the âhidden pricesâ that can be incurred when investors donât get the best price.
http://www.nytimes.com/2012/05/07/b...a-conflict-of-interest.html?pagewanted=1&_r=1