A trio of Wall Street firms are gearing up to win orders from retail brokerages, targeting the type of "mom and pop" stock trades that have become increasingly valuable to sophisticated electronic traders, according to the Wall St Journal report..
Goldman Sachs, Cantor Fitzgerald & Co. and Credit Suisse are launching new divisions that will collect individual stock orders from retail brokers and funnel them through the banks' electronic trading systems.
Known as wholesale market-making, the business is dominated by a handful of firms that pay retail brokerages like TD Ameritrade Holding Corp. (AMTD) and Charles Schwab Corp. (SCHW) for the first crack at trading against individual investors' buy and sell orders. Wholesalers reap profits by using automated trading strategies to quickly turn over the positions for small gains, and interpret the tone of incoming orders to inform trading decisions in other markets….
Retail orders are attractive to automated traders and institutional investors because individuals invest with different aims than professionals who base their buying and selling on statistics and signals from other corners of the market, or those trying to carry out a much-larger trade. In return, individuals are promised more competitive prices on their trades than they would get by dealing directly with exchanges, which charge fees to do business...
Read more at http://online.wsj.com/article/BT-CO-20111209-711895.html
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