Wholesaler Execution Quality

We obtain a proprietary data set of all marketable orders routed to one or more wholesalers in May 2022 to study wholesaler execution quality. Contrary to conventional wisdom, external liquidity is used to fill 28.6% of the shares in our sample. We find that order size, both absolute and relative to book depth, and recent order imbalance are associated with the decision to source external liquidity. Using a new benchmark, we find the value of both price and size improvement provided to sample orders is 6.5 times greater than the value of price improvement as measured by mandatory monthly Rule 605 reports. Our results indicate that price improvement is not the only measure that should be used when evaluating the relative benefits of the current market structure to alternatives. This paper was accepted by Agostino Capponi, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.04156 .

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Publication Details

Journal
Management Science
Published
2025-08-29
DOI
https://doi.org/10.1287/mnsc.2023.04156
Citations
1
Primary Topic
Advanced Statistical Process Monitoring
Type
article
Field-Weighted Citation Impact
1.40
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article

Wholesaler Execution Quality

Robert H. Battalio, Robert H. Jennings
1 citations
Management Science
Advanced Statistical Process Monitoring
1.40
article

Wholesaler Execution Quality

Robert H. Battalio, Robert H. Jennings
article en
1 citations

Abstract

We obtain a proprietary data set of all marketable orders routed to one or more wholesalers in May 2022 to study wholesaler execution quality. Contrary to conventional wisdom, external liquidity is used to fill 28.6% of the shares in our sample. We find that order size, both absolute and relative to book depth, and recent order imbalance are associated with the decision to source external liquidity. Using a new benchmark, we find the value of both price and size improvement provided to sample orders is 6.5 times greater than the value of price improvement as measured by mandatory monthly Rule 605 reports. Our results indicate that price improvement is not the only measure that should be used when evaluating the relative benefits of the current market structure to alternatives. This paper was accepted by Agostino Capponi, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.04156 .

Management Science
University of Notre Dame (US), Indiana University Bloomington (US)
Openalex Percentile: Top 13%
Advanced Statistical Process Monitoring
1.40
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Wholesaler Execution Quality — Robert H. Battalio, Robert H. Jennings · Management Science (2025) | TGRS Research Map | TGRS