DEMYSTIFYING CROSS TRADES: BROKER BALANCING ACT

Cross trades involve buying and selling securities between two clients of the same broker without going through the exchange.

Cross trades are executed to save on transaction costs and avoid market impact.

Brokers have a fiduciary duty to act in the best interest of their clients and ensure fair execution of cross trades.

Brokers must disclose the terms of the cross trade to both clients and obtain their consent before executing it.

Brokers must ensure that the price of the cross trade is fair and reasonable based on prevailing market conditions.

Brokers must avoid conflicts of interest and ensure that one client is not favored over the other in the execution of cross trades.

Regulators closely monitor cross trades to prevent market abuse and ensure fair and transparent trading practices.