Some Free Brokers Are Cheaper Than Others
Also whistle-blower incentives, anti-ESG disputes, AMC APE voting mechanics, cannabis securities fraud and nontraditional business cards.
Programming note: Money Stuff will be off tomorrow, back on Monday.
In general, in the US, if you buy or sell stock through a big retail brokerage, your broker sends your order to a “wholesaler” — a big electronic market-making firm like Citadel Securities, Virtu Financial Inc. or Jane Street Capital — which takes the other side of the trade, selling you the stock you’re buying or buying the stock you’re selling. The wholesalers want to trade with retail orders, because in general retail orders are less risky than orders on the public stock exchanges; they have less “adverse selection.” If a market maker is trading on the stock exchange, and it buys 100 shares of stock, then there is a decent chance that the seller knows something it doesn’t. Perhaps the seller is a clever hedge fund that has done lots of clever research and knows that the stock is about to go down; if so, the market maker will lose money on the stock it bought. Or perhaps the seller is a gigantic pension fund and is going to go on to dump a million shares and drive down the price; if so, the market maker will also lose money on the stock it bought. Or perhaps the seller is an even faster and smarter electronic trader than the market maker, and it knows that the stock will go down in the next microsecond, etc.