Choosing Routes

Discussion in 'Order Execution' started by woosterboy, Mar 4, 2004.

  1. Hello Everyone,

    Let me say thanks in advance to anyone who can provide some insight on this subject. I am new to ET, having just learned about it recently in a class on the real tick platform. And I only have just over 2 years experience with the markets at all, but I have learned what at times seems alot, and most of the time seems like the very tiniest tip of the iceberg. So reading through a lot of the threads posted here is helpful also and I'm glad for this community.
    Before posting this thread, I read all of the threads in the order execution section and have gone to the various sites , i.e. ARCA, INET, etc. and read as much as I could find and now am possibly more confused then I was. My first direct access broker was Cybertrader and then about 1 year ago I switched to IB. Both of them of course have "smart" routing built into their platform and at the time I made the decision based on the type of trading I was doing and how much else I was still trying to learn , to not try to self direct my orders.

    Now , however I am changing to the Real Tick platform and am trying to figure out what routes to use for both listed and Nasdaq stocks. I've read various takes on this where some people seem to pick one route and use it almost exclusively and others who seem to "pick" the best route based on the security they are trading at that time, etc. I don't know if I am putting too much emphasis on this or not, but from the posts in some of these threads it seems every bit as important as any other piece of the puzzle. I spoke with someone at the broker and he was suggesting sticking with ISI and OSE for NYSE stocks and although I've found references to both of these, that's about it, can't find a site for either one, don't even know what the acronyms stand for.
    I hope this isn't too much of a newbie question and Again , thanks in advance for any help in this matter.
    Good Trading everyone,
  2. qazmax


    The bottom line is...
    When your broker tells you your order is going to ISI or OES, they mean it is being directed to an exchange. Likely your order is routed to the primary exchange of a security, if you cannot designate otehrwise.

    These are service that allow brokerages a connection to exchanges.
    did not see the ISI website??

    Listed stock can be traded:
    at ECNs (ATSs) like ARCA, INET, BRUT, BTRADE
    * note: ARCA is an exchange now... but I like to think of them as an ECN
    With "3rd market" market makers - e.g. NITE, TMBR, etc...
    On competing exchanges NYSE, AMEX, CSE, (ARCA), etc...
    Soon (by next month 100%) Nasdaq will offer listed stock execution on their Supermontage platform

    In the end I beleive that there will be no more need for stock labelling as listed or OTC. It will best a best execution decision in all stocks.

  3. That helps some. My broker will now be Terra Nova so rather than them telling me where my order is going, I'm trying to wade through all the info I'm finding on where to route orders depending on what I'm trading at the time. Finding a lot of info but having a hard time making any cohesive sense out of it.

    It looks like I can designate for Listed, at least the following- ARCA, BRUT, BTRADE, INET, INSTINET, ISI and OES and for OTC, at least the following, ARCA, BRUT, BTRADE, INET, INSTINET, ISI, SELECTNET and SUPERMONTAGE.

    Perhaps my question is too vague and/or dumb, I am trying to get some insight as to which routes are "better" based on peoples experience.

    I am normally trading anywhere from a cpl. hundred to a few thousand shares if that makes a big difference.

  4. wooster,

    The answer actually depends on strategy and cost factors (do you pay extra for ECN fees?) but here's a general guideline based on the current market environment and your available routes:

    For NYSE stocks:

    * OES and ISI offer DOT routes and are generally the best destinations for limit orders and market orders (if you must use them) when the NYSE is on the bid/offer.

    * OES and ISI via Direct+ (auto-execution) are the best routes when: 1) you want immediate execution against an NYSE bid/offer that is less than 6 cents away from last sale, 2) that bid/offer is over 100 shares, and 3) that bid/offer is the National Best Bid or Offer (NBBO).

    * OES offers direct connections to the regionals. Check with Terra Nova to see what regionals will offer you auto-ex. If you can auto-ex, a regional is often the way to go if they're on the bid/offer. If you can't auto-ex, I don't recommend routing to a regional.

    * If "NASD" is on the NBBO, you can use ARCA to get to it.

    * Last but not least, if an ECN is on the NBBO, then use that ECN to route directly. Or you can use ARCA but it may cost more.

    For NASDAQ stocks (assuming you pay ECN fees and get rebates):

    * If you want to take liquidity, INET's SmartRouter can get you to most destinations efficiently for .0025/share, a much better deal than ARCA's SmartRouter at .004/share.

    * If you want to add liquidity, and qualify for a rebate, INET is also probably the way to go since it currently offers the best liquidity for NASDAQ stocks.

    - Rob