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September 10, 2025Open Access

The “Actual Retail Price” of Equity Trades

Key Points

Execution prices vary significantly across brokers, highlighting discrepancies in trade execution.
The mean round-trip cost of execution ranges from 0.07% to 0.46%, indicating varied costs for traders.
Variation in payment for order flow does not account for the large differences in execution prices observed.
Recommendations include enhanced disclosures to improve transparency regarding execution quality.

Abstract

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.

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Cite This Study

Schwarz et al. (Fri,) studied this question.

synapsesocial.com/papers/68c19f9154b1d3bfb60dad98 https://doi.org/https://doi.org/10.1111/jofi.13467

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