NYSE execution costs: A case study of a leading bank

Using trade data obtained from a major bank and a measure of indirect execution costs based on the stock price when orders are placed, we investigate indirect costs and their relation to brokerage commissions. For all trades the mean brokerage commission is 6.5 cents per share, and the mean indirect execution cost is about 3.6 cents per share, or 0.1084% of the transactions amount. Contrary to the prediction of the price pressure hypothesis, indirect execution costs are lower for larger size trades. Further, higher indirect execution costs are not associated with lower brokerage commission. © 1994 Kluwer Academic Publishers