U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

Internalization

When you place an order to buy or sell a stock, your broker has choices on where to execute your order. Instead of routing your order to a market or market-makers for execution, your broker may fill the order from the firm's own inventory. This is called "internalization." In this way, your broker's firm may make money on the "spread" – which is the difference between the purchase price and the sale price. To learn more about the basics of trade execution – including order routing, payment for order flow, and internalization – you should read Trade Execution: What Every Investor Should Know.

http://www.sec.gov/answers/internalization.htm

We have provided this information as a service to investors.  It is neither a legal interpretation nor a statement of SEC policy.  If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.


Modified:03/20/2000