Brokers Routing to Their Own ATSs Face Scrutiny

Brokers Routing to Their Own ATSs Face Scrutiny

A FINRA working paper has raised concerns about broker order routing to affiliated alternative trading systems (ATSs), shedding light on order routing decisions and potential conflicts that can impact execution quality. Can a higher level of scrutiny by regulators be on the way?


A FINRA working paper has raised concerns about broker order routing to affiliated alternative trading systems (ATSs), shedding light on order routing decisions and potential conflicts that can impact execution quality.

The major finding is that institutional orders routed by brokers that send a relatively high percentage of institutional orders through affiliated ATSs receive lower fill rates and higher execution costs, according to a working paper by FINRA’s Office of the Chief Economist, published in late January.

Though this is not the case with all brokers that own ATSs, FINRA was able to analyze a massive amount of data to identify distinct patterns of order routing behavior.

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