It was quite a revelation when i came to know that in US market the brokers fulfil the orders & not the exchanges. Although I did some digging, the information is all one sided.
Require inputs from professionals who have traded in US equity as well as derivatives. If someone knows the order flow architecture, please share that as well.
https://www.sec.gov/about/reports-publications/investor-publications/holding-your-securities-get-the-facts
Before deciding who to use for help with your investing, learn what brokers, dealers, and broker-dealers are and what services they provide.
They use payment for order flow, that’s how they are so efficient. With multiple exchanges, instruments and a whole lot of liquid trading underlying. It does have it’s own merits and demerits as it is heavily based on trust.
I will explain it.
In India, all orders should be sent to exchange.
In USA, orders r sent to exchange. Orders are matched in broker level also. Also orders are sent to big brokers who act as exchange.
There is no demat account in usa…all the shares are held with broker. Also in usa there is no need to send orders to exchange as brokers act as exchange.
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October 1st, 2019 was quite eventful for the brokerage industry. In the US, Interactive Brokers introduced a“Lite” plan with no commissions, followed by Schwab, TD Ameritrade, E-Trade, and more. These firms were charging up to $7 per trade. Stock...
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https://twitter.com/Nithin0dha/status/1491328009571540995?t=ZLnVYc-ycKfreUeCD98ZuQ&s=19
Maybe this can help.
I still have no clue how the payment for order flow really exists. Wont there be arbitrage?
viswaram:
Wont there be arbitrage?
That’s what they’re making money with.