As we illustrated in our November report, A Closer Look at Off-Exchange and Retail Market Share, individual investors trading directly in the markets have grown to account for an ever-larger portion of total equities volume over the past two years. Most of this retail flow consists of price-taking orders, which other market participants consider “non-toxic” and therefore highly desirable to trade against. Although the lion’s share of it is internalized by off-exchange “wholesalers,” some marketable retail flow is available for the buy side to access on other venues, including ATSs and some exchanges. In this report, we detail the various opportunities for interacting with non-internalized retail flow, including some retail volume estimates on individual marketplaces and mechanisms for segmenting retail from other counterparties.
February 14, 2022