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When a firm fills your order from its own inventory instead of sending it to an exchange.
Why It Matters
Internalization means a wholesaler takes the other side of your trade directly, filling it from its own book rather than matching you on a public exchange. It can be fast and often comes with a bit of price improvement, which is part of why it's common for retail orders. The flip side is that the order never reaches a public venue, so it doesn't add to visible market activity - one reason critics scrutinize how much retail volume is internalized.
Key Points
- The firm fills your order from its own inventory
- Common for retail orders, often with price improvement
- The trade never reaches a public exchange
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How Your Order Gets Filled
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Common Questions
When a firm fills your order from its own inventory instead of sending it to an exchange. Internalization means a wholesaler takes the other side of your trade directly, filling it from its own book rather than matching you on a public exchange. It can be fast and often comes with a bit of price improvement, which is part of why it's common for retail orders.
Internalization means a wholesaler takes the other side of your trade directly, filling it from its own book rather than matching you on a public exchange. It can be fast and often comes with a bit of price improvement, which is part of why it's common for retail orders. The flip side is that the order never reaches a public venue, so it doesn't add to visible market activity - one reason critics scrutinize how much retail volume is internalized.
The firm fills your order from its own inventory
Common for retail orders, often with price improvement
The trade never reaches a public exchange