Do Brokers Misallocate Customer Trades? Evidence from Futures Markets

摘要

In the context of futures markets, we study whether brokers allocate more favorable tradesto their own accounts, and less favorable trades to their customers. We find that, within a thirtyminute trading bracket, brokers on average buy at a lower price and sell at a higher price for theirown accounts relative to their customers. We show evidence that brokers??? price advantage may becompensation for providing liquidity to the market when brokers trade for their own accounts, butno evidence that they are due to brokers??? superior information, or to greater effort by brokers whentrading for themselves. Consistent with the idea that, in a competitive market for brokerageservices, brokers may pass on some of their profits to customers, we find that brokers who trade forthemselves also provide superior execution for their customers, relative to brokers who do not tradefor themselves.