Would Order-By-Order Auctions Be Competitive?

• 成果类型: Article
• 署名作者: Ernst, Thomas; Spatt, Chester; Sun, Jian
• 署名单位: University System of Maryland; University of Maryland College Park; Carnegie Mellon University; Singapore Management University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13449
• 发表日期: 2025
• 关键词: allocation; payment; bidder

摘要

We model two methods of executing segregated retail orders: brokers' routing, whereby brokers allocate orders using the market maker's overall performance, and order-by-order auctions, where market makers bid on individual orders, a recent U.S. Securities and Exchange Commission proposal. Order-by-order auctions improve allocative efficiency, but face a winner's curse reducing retail investor welfare, particularly when liquidity is limited. Additional market participants competing for retail orders fail to improve total efficiency and investor welfare when entrants possess information superior to incumbent wholesalers. Our results hold when new entrants are less informed or the information structure differs. We also examine the cross-subsidization of brokers' routing.