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Allen Ferrell, The Allocation of Investors' Orders and Inefficient Market Competition: A Proposal (May 13, 2000).

Abstract: An issue that has increasingly occupied the attention of the Securities and Exchange Commission is "payment for order flow." This is the practice whereby securities markets compete for orders placed by brokers by providing side payments to brokers in return for brokers promising to send them investors' orders. Does this create inefficient nonprice competition between securities markets? The paper argues that it does, that all the proposed solutions (including the SEC's disclosure requirements) miss the mark, and that the problem is really a result of the SEC's regulation of the prices at which investors' orders must be filled. Remove this regulatory bar (with a few wrinkles) and the problem would be resolved without the need for the current cumbersome and expensive regulatory apparatus.