The baseline functions that a broker-dealer undertakes in customer relationships could easily be summarized as access and recordkeeping for introducing BD's, with self-clearing firms handling the additional custodial and reporting functions. Most of what a broker dealer makes money for is owning the technological and professional infrastructure necessary for completing securities transactions, and then repackaging trading and account information into a format that's more palatable for the individual customer.
The hope was, and is, that firms who have SEC registration and SRO membership (and therefore, it is assumed, the requisite skills and licensure mandated to conduct a securities-related business) will fight one another on two fronts: commissions/mark-ups (particularly following the 1976 commission deregulation, "May Day") and in value added features (charting, research, check writing, perks ad nauseum) to win your business.
I personally could see trading directly on an ECN (which are currently BD's, but may be exchanges eventually), but an order entry broker-dealer would be more likely to give me several execution options for my orders...I wouldn't expect (until perhaps the ECN's are permitted, let alone mandated, to access ITS) the 'ABCD' ECN to send my orders to the 'WXYZ' ECN if prices were better there.
Having an automated best price routing feature, a trader working to get me the best price (where such occurs), or merely being able to choose where my orders go is - at least to me, and at this point in time - a better proposition...bearing in mind that I overwhelmingly send my orders to 3-5 of the ECN's.
LPS5 |
