What is ‘Each Way’
A slang phrase used when a broker earns commissions from both parties in a security sale. The purchaser and the seller of the security will pay a fee to the broker for facilitating the transaction.
Explaining ‘Each Way’
Going each way on a trade is ideal for a broker. When investors purchase or sell a stock, bond or derivative, they will usually conduct the transaction through a broker. The broker will take the client’s order and try to fill it. For this service, the broker will usually charge a small fee to cover the transaction costs. If the broker is able to match the clients together, they are able to earn twice the commission on a single transaction.
Further Reading
- The arbitrage principle in financial economics – www.aeaweb.org [PDF]
- Self-organized complexity in economics and finance – www.pnas.org [PDF]
