Internalization

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.

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