Purchased order now refers to the practice of dealers or trading local
es paying brokers for retail order flow. It is alleged that such agree
ments are used to ''cream skim'' uninformed liquidity trades, leaving
the information-based trades to established markets. We develop a test
of this hypothesis, using a model of the stochastic process of trades
. We then estimate the model for a sample of stocks known to be used i
n order purchase agreements that trade on the New York Stock Exchange
(NYSE) and the Cincinnati Stock Exchange. Our main empirical result is
that there is a significant difference in the information content of
orders executed in New York and Cincinnati, and that this difference i
s consistant with cream-skimming.