Preferencing, internalization, best execution, and dealer profits
Publication
, Journal Article
Hansch, O; Naik, NY; Viswanathan, S
Published in: Journal of Finance
October 1, 1999
The practices of preferencing and internalization have been alleged to support collusion, cause worse execution, and lead to wider spreads in dealership style markets relative to auction style markets. For a sample of London Stock Exchange stocks, we find that preferenced trades pay higher spreads, however they do not generate higher dealer profits. Internalized trades pay lower, not higher, spreads. We do not find a relation between the extent of preferencing or internalization and spreads across stocks. These results do not lend support to the "collusion" hypothesis but are consistent with a "costly search and trading relationships" hypothesis.
Duke Scholars
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Published In
Journal of Finance
DOI
ISSN
0022-1082
Publication Date
October 1, 1999
Volume
54
Issue
5
Start / End Page
1799 / 1828
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
Citation
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Hansch, O., Naik, N. Y., & Viswanathan, S. (1999). Preferencing, internalization, best execution, and dealer profits. Journal of Finance, 54(5), 1799–1828. https://doi.org/10.1111/0022-1082.00167
Hansch, O., N. Y. Naik, and S. Viswanathan. “Preferencing, internalization, best execution, and dealer profits.” Journal of Finance 54, no. 5 (October 1, 1999): 1799–1828. https://doi.org/10.1111/0022-1082.00167.
Hansch O, Naik NY, Viswanathan S. Preferencing, internalization, best execution, and dealer profits. Journal of Finance. 1999 Oct 1;54(5):1799–828.
Hansch, O., et al. “Preferencing, internalization, best execution, and dealer profits.” Journal of Finance, vol. 54, no. 5, Oct. 1999, pp. 1799–828. Scopus, doi:10.1111/0022-1082.00167.
Hansch O, Naik NY, Viswanathan S. Preferencing, internalization, best execution, and dealer profits. Journal of Finance. 1999 Oct 1;54(5):1799–1828.
Published In
Journal of Finance
DOI
ISSN
0022-1082
Publication Date
October 1, 1999
Volume
54
Issue
5
Start / End Page
1799 / 1828
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment