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The costs and benefits of dual trading
This paper finds that marketmaking practices of dual traders are pit-specific. In the S&P 500 futures pit, the authors estimate that, because of a lower price impact, customers of dual traders pay eighteen cents less per contract on their trades, compared with customers of pure brokers. According to the authors' estimates, however, customers pay eleven cents more per contract for a purchase and receive nine cents less per contract for a sale, compared with the prices dual traders obtain for their own trades. Thus, the estimated net benefit of dual trading to customers in the S&P 500 futures ...