Netting with firm central book vs trading directly with market

Hi,

Let's talk about submitting trades inside a fund.

Market = basically you buy/sell something from an external party and the transaction is in your account. Typical trading

Netting  = traders in the firm submit their orders to an aggregation system that matches buyers and sellers. The firm assigned a number to each internal trader's account and only buys/sells if needed. If the combined order is 0, NOTHING is bought at market.

It's further broken down into 2 subcategories

  1. Automated Netting: basically an internal market maker module that does things an in automated way. Essentially for on exchange and liquid products
  2. Human Netting: for firms that are more old fashioned. Lot more internal bullshit. I guess non-liquid stuff like CLO's would fall into here, but I would argue you be better off going directly to market

My issue with netting:

  1. you don't know market impact and are essentially getting by using internal flows. (which may be good for some people)
  2. firm may front run your ideas
  3. if human netting, a lot more bullshit and trading frequency is limited.

Why would you prefer one over the other? Does it factor into your decision to work at the firm?

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