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clerk's boss is getting payment for order flow, and you as the customer should be grateful because you are paying a discount commission. Everyone should be contented. |
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Even your friend the broker has no power to challenge the trading desk. If you protest any particular trade or sequence of trades, your broker can offer very little in the way of customer satisfaction, because your broker is more concerned about his or her job. Also, your broker, after passing your order to the trading desk, tends to believe the facts portrayed by the trading desk. |
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It is difficult to take on an institutional mechanism that has been structured to let you lose. Your broker may be a personal friend but is in no position to help you fight the system. Your broker has no time to conduct a crusade because the phone is ringing with new orders from other customers. It is difficult for a broker to leave a firm. Moreover, after the broker leaves, many "clients" could still be trading with the old firm. |
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What happens after your friend the broker turns your order to the trading desk? It gets handed to an order clerk. The order clerk now has possession of your checkbook. The order clerk calls the market maker, who may not execute the trade as propitiously as possible because the stock is collapsing, or conversely going up too fast. Later, the market maker may invite the order clerk to dinner. What happened to the broker's obligation to obtain the best price for the customer? |
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Assume that you've received what you regard as a less than adequate execution. Your only recourse is to go through an arbitration process that takes forever. You are left with the dubious distinction of paying heavy legal fees in a forum where the adjudicator is from the industry that is part of the problem. You get a chance to exhaust your spirit in a grossly inappropriate court of no resort. The industry knows that the customer must submit to arbitration at the NASD. Arbitration is a machine into which you enter a pig and come out a sausage, and it can take years. Even a group as vocal as the SOES traders had trouble challenging the system. The real |
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