internalize

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Internalization

A trade between an investor and his/her brokerage. That is, the client makes an order to the brokerage to buy or sell a security and the brokerage fills the order from its own inventory of the security. This can be advantageous to the brokerage because it is less expensive than going out and finding another buyer or seller. Some exchanges prohibit these trades, and brokerages are required to report internalization on exchanges that permit it.
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internalize

To send a customer order from a brokerage firm to the firm's own specialist or market maker. Internalizing an order allows a broker to share in the profit (spread between the bid and ask) of executing the order.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Thin-ideal internalization: Mounting evidence for a new risk factor for body image disturbance and eating pathology.
Proof of Proposition 5: (i) We use the subscript "o" to refer to outcomes in the order flow internalization model.
(ii) In the market without internalization, and with free entry, [m.sub.2] = 1 and [m.sub.1] = 0.
Let [[lambda].sub.w] be the (inverse of) market depth in the market without internalization. [[lambda].sub.w] is simply [[lambda].sub.o] evaluated at [m.sub.1] = 0.
Price informativeness with internalization, P[I.sub.o], is defined as [summation over (v)] - Var(v\[p.sub.o]), where [p.sub.o] = [[lambda].sub.o] [y.sub.o] and [y.sub.o] is the net order flow with internalization.