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Stats › Intraday and market microstructure › Price improvement

Your broker matters more than payment for order flow does

TD Ameritrade
47.2%
E*Trade
36.1%
Fidelity
35.8%
Robinhood
26.8%
IBKR Lite
19.5%
IBKR Pro
18.8%

Price improvement as a percentage of the national best bid and offer spread, where 50% means the midpoint. From 74,801 analysed trades of about $100 each, placed simultaneously across six accounts at five brokers in 128 stocks, 21 December 2021 to 9 June 2022. Submission order was randomised, and submission-order effects are insignificant.

Wholesalers return 24% of the quoted spread as price improvement against 3% at exchanges, and 66% of shares they handle get some improvement. A controlled experiment placing identical orders at five brokers found payment for order flow explains about 3.4% of the difference between the best and worst.

47.2%Price improvement as a share of the quoted spread, best broker tested
18.8%The same for the worst broker tested
About 3.4%Share of the gap between those two explained by payment for order flow
7.0 to 46.2bpRound-trip execution cost range across the brokers tested

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