Equity Trading by Institutional Investors. To Cross or Not to Cross?
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- Discussion Papers 
The costs to institutional investors of trading equity are of obvious practical as well as academic interest. To date, the empirical academic literature on this topic has concentrated on data from equity trading at organized exchanges. This paper adds to the extant research by inculding evidence on using alternative mechanisms for facilitating equity trading, so called "crossing". We use the equity trades of one large institutional investor, the Norwegian Petroleum Fund, to investigate the costs of trading equity using such alternative trading venues. The results show that for trades that were crossed, the average implicit and explicit costs were lower than found in similar cases in the academic literature. We do, however, find that the orders that did not get crossed were special. By conduction an event study we discover the presence of "adverse selection": The "best" stocks do not get crossed.