Abstract
I show that dual trading reduces the net order flow and market depth. Trading volume and gross (of commission fees) profits of informed traders are lower with dual trading, while trading volume and gross losses of uninformed traders are unaffected. When the broker′s commission income is independent of the customer′s trading volume, the competitive commission fee is lower with dual trading. The utility of uninformed traders (net of commission fees) increases with dual trading, while the net profits of informed traders decrease. Journal of Economic Literature Classification Numbers: G12, G13, D82.
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