Internalization

AAA

DEFINITION of 'Internalization'

A transaction conducted within the confines of a corporation rather than in the open market. Internalization can apply to a multinational corporation shifting assets between subsidiaries cross border. In investing, internalization refers to the decision by a brokerage firm to fill a buy order for shares of security from its own inventory of shares rather than seeking to execute the trade using outside inventory.

INVESTOPEDIA EXPLAINS 'Internalization'

Brokerage firms internalize securities orders to take advantage of the difference between what they purchased shares for and what they sell them for, known as the spread. For example, a firm may see a greater spread by selling its own shares than by selling them on the open market. Additionally, because shares are not conducted on the open market the brokerage firm is less likely to influence prices if it sells a large portion of shares.

RELATED TERMS
  1. Market-Maker Spread

    The difference between the price at which a market maker is willing ...
  2. Electronic Communication Network ...

    An electronic system that attempts to eliminate the role of a ...
  3. Open Market

    An economic system with no barriers to free market activity. ...
  4. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  5. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
  6. Regional Stock Exchange

    A place outside of a country's primary financial center where ...
Related Articles
  1.  These are the two main types of trades that investors will encounter: principal and agent transactions.
    Investing Basics

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  2. Investing Basics

    Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
  3. Mutual Funds & ETFs

    6 Proven Methods For Selling Stocks

    These common techniques can help investors take some of the emotion out of deciding when to sell a stock.
  4. If you flown in an airplane, shopped for food or sat comfortably in a hot climate, you've probably used a United Technologies product.
    Stock Analysis

    A United Technologies Product: Always Closeby

    If you flown in an airplane, shopped for food or sat comfortably in a hot climate, you've probably used a United Technologies product.
  5. Warren Buffett
    Stock Analysis

    How Warren Buffett made Berkshire Hathaway a World-beater

    It would almost be easier to list the industry sectors in which Omaha-based Berkshire Hathaway Inc. (NYSE:BRK.A) doesn’t turn gargantuan profits.
  6. Fundamental Analysis

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  7. As one of the world’s most reputable companies, one of its most profitable, and one of its largest, Disney continues to seek new opportunities in its ninth decade of existence.
    Investing News

    This Company Is No Mickey Mouse Operation

    With its famous history that's become part of popular culture, and the instantly recognizable silhouette in its logo, The Walt Disney Co. is only an animation studio in the same way that Johnson ...
  8. Chart Advisor

    This ETF Will Deliver Upside With Downside Protection

    With markets near all-time highs as naysayers warn of a coming correction, how can you stick around for more gains and still limit downside risk? The answer could be industrials.
  9. What Will Become of Berkshire Hathaway Beyond Buffett?
    Investing News

    What Will Become of Berkshire Hathaway Beyond Buffett?

    Warren Buffett, who has become almost synonymous with the term “investor,” remains robust, but at 83 is clearly somewhere in the fourth quarter of the game. What does that mean for Berkshire ...
  10. Is It Time To Break Up Berkshire Hathaway?
    Investing News

    Is It Time To Break Up Berkshire Hathaway?

    Warren Buffett's Berkshire Hathaway is at the pinnacle of success and that’s when business leaders have to be the most wary. Will investors still be partying in Omaha a decade from now?

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center