The “Actual Retail Price” of Equity Trades
ABSTRACT We compare execution quality of six brokerage accounts across five brokers by generating a sample of 85,000 simultaneous market orders. Commission levels and payment for order flow (PFOF) differ across our accounts. We find that execution prices vary significantly across brokers: the mean account‐level round‐trip cost ranges from 0.07% to 0.46%, excluding any commissions. The dispersion is due to off‐exchange wholesalers systematically giving different execution prices for the same trades to different brokers. Across brokers, variation in PFOF does not explain the large variation in price execution. We provide several suggestions for more informative disclosures on execution quality.
Authors
- Philippe Jorion (ORCID: https://orcid.org/0000-0002-6727-7827)
- Christopher G. Schwarz (ORCID: https://orcid.org/0000-0002-1466-8357)
- Terrance Odean (ORCID: https://orcid.org/0000-0003-4747-9461)
- Brad M. Barber
- Xing Huang (ORCID: https://orcid.org/0000-0003-4531-3070)
Institutions
- Concordia University Irvine (US)
- Georgetown University (US)
- University of California, Berkeley (US)
Publication Details
- Journal
- The Journal of Finance
- Published
- 2025-07-25
- DOI
- https://doi.org/10.1111/jofi.13467
- Citations
- 2
- Primary Topic
- Financial Markets and Investment Strategies
- Type
- article
- Field-Weighted Citation Impact
- 4.42