Policy Brief: Payment for Order Flow

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17 August 2016 | 6 pages
Source: CFA Institute
Sviatoslav Rosov, PhD, CFA

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Summary

We investigate the clarification in 2012 by the Financial Services Authority that essentially banned the use of payment for order flow arrangements in the United Kingdom. We found that from 2010 to 2014 the proportion of retail sized trades executing at the best quoted price increased from around 65% to more than 90%, suggesting that the integrity of the order book has improved. We argue that quote integrity can be maintained without trade-through protection.

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