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How can brokers profit from spread? Isn’t market makers that profit from spread?

And also how do brokers profit from OTC gain? How does that exactly work?

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  • This belongs in the economics stack. Suggest porting it over there. Feb 17, 2022 at 2:08
  • can't brokers be market makers? (hint: they are for their clients)
    – MD-Tech
    Feb 17, 2022 at 11:27
  • Thanks, but I’ve read a paper that said almost 100% of all orders that brokers get was internalized which means those orders were routed directly to investment bank(OTC market maker), not to exchanges, which means brokers are most of the time acting as agents, not MM themselves… cfainstitute.org/-/media/documents/article/position-paper/…
    – Kmd
    Feb 17, 2022 at 14:42
  • @Kmd The brokers quote spreads to their clients and so can widen (or narrow I suppose) the spreads that their clients can trade on which is essentially the broker acting as a market maker for an informal definition of a market maker. They are also liquidity providers where they are inrternalising
    – MD-Tech
    Feb 17, 2022 at 16:55
  • Do you mean brokers are MM in a sense that they’ll execute our order by routing orders but they don’t technically take the other side of our orders filling them unless they internalize them?
    – Kmd
    Feb 17, 2022 at 20:06

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