Typical internalizer trade is:
1. RH user wants to buy 1000 shares of XYZ. Offer price is $10.00
2. RH forwards the full order to their execution venue partner. They get paid (assuming SeekingAlpha story is true) $260/$1mm traded, or $2.60.
3. Executor takes the order and immediately sends 900 shares to the market, lifting the offers. Now best offer is $10.10
4. Executor facilitates the tail of the order, 100 shares, at $10.10. So they are short -100 shares here - or they can give a de minimis price improvement (like 10.0985) to meet their contractual obligations.
5. Temporary market impact attenuates and offer mean reverts to $10.05
6. Executor still has risk on their books - but their paper mark-to-market profit is $5.00.
7. Risk can be mitigated by waiting for crossing order or waiting for more favorable offers to close out the short.
So roughly speaking they paid $2.60 to get the order, but made $5 on it...
1. RH user wants to buy 1000 shares of XYZ. Offer price is $10.00
2. RH forwards the full order to their execution venue partner. They get paid (assuming SeekingAlpha story is true) $260/$1mm traded, or $2.60.
3. Executor takes the order and immediately sends 900 shares to the market, lifting the offers. Now best offer is $10.10
4. Executor facilitates the tail of the order, 100 shares, at $10.10. So they are short -100 shares here - or they can give a de minimis price improvement (like 10.0985) to meet their contractual obligations.
5. Temporary market impact attenuates and offer mean reverts to $10.05
6. Executor still has risk on their books - but their paper mark-to-market profit is $5.00.
7. Risk can be mitigated by waiting for crossing order or waiting for more favorable offers to close out the short.
So roughly speaking they paid $2.60 to get the order, but made $5 on it...