Not every trade happens on an exchange. A lot of trading happens away from organized markets, and how it happens raises some genuinely difficult questions about whether investors are getting a fair deal.
In Part 1 we covered what brokers do, different broker types, and how they make money. Now we get to the uncomfortable part: what happens when your broker does not have your best interests in mind.
Most brokers are honest. But the relationship between broker and client has a built-in conflict that can’t be fully eliminated. The second half of Chapter 7 in “Trading and Exchanges” covers this conflict, the ways dishonest brokers exploit it, and the systems markets have built to keep everyone (mostly) honest.