I am an investment firm. Client A is my preferred client, dedicates a lot of money, contributes more in fees, refers their rich friends. Client B is my typical client, retiree, retail investor, passive and lower income.
Monday morning:
Client A has a lot to unload, is looking to move capital out of equities and into something less volatile.
Client B is ready to make their weekly/monthly payroll investment.
Shares of XYZ are trading at $100. Client A wants to sell 50, client B wants to buy 100. Whose order gets processed first? Client B, which causes the price to rise. Client B pays more as Client A’s shares are withheld. Then once Client B is filled and the market is moved up Client A’s shares are sold. Giving Client A a better price and Client B a worse price. Because Client A is the preferred client.
I could think of a dozen versions of this scenario. I am assuming this happens all day, every day at an enormous scale right?