Direct routed order execution comparison?

Discussion in 'Trading Software' started by Kaga, Mar 10, 2022.

  1. Kaga


    Platforms such as DAS Trader or Sterling Trader are well known for their superior order execution capabilities. I'm curious how their order executions compare to direct routed orders executed by TWS of Interactive Brokers? Is there any advantage in linking DAS or Sterling with IB for execution, or are directed orders just as fast in TWS?
  2. As far as I know, they don't do any of that, they're just front end, connecting your trading account to their graphical interface with an API.
  3. Robert Morse

    Robert Morse Sponsor

    Kaga- I'll add Lightspeed Trader in addition to Sterling Trader Pro, I have no knowledge of DAS, excel at fast order entry with configurable order tickets, hot keys and hot buttons. This helps an active trader get the order out of the software fast. The speed of execution is dependent on other factor such as how fast risk checks are done, your distance and time to the servers in NJ, and the routes that are chosen. Our customers tell us that the use of an ECN or Exchange vs the free routes, is materially faster, especially during high volume times.

    qlai likes this.
  4. MrMuppet


    Please make sure you understand what you are getting into.
    Direct access means you are responsible for choosing venue, route and order type.

    Currently we're looking at close to 70 different order types for NYSE Arca and there are 13 different exchanges in the US. Make sure to check if all order types and routes you want to use are available from your broker of choice.

    Going from the play doh market that is offered by retail brokers such as IB towards direct access is a steep learning curve, so make sure to account for that or you will be completely lost.

    Go through every exchanges order types and learn what they do and how they are used.
    You won't ever use an IOC ISO for sure since you don't meet the requirements of REG NMS Rule 600, but you definitely can use a Primary Only, MPL or Reserve Order.

    They all have different priorities in the book, come with different TIFs and conditions.
  5. Kaga


    Thanks for your replies!

    I was thinking more along the lines of daytrading with up to a few thousand shares, and sending direct routed orders e.g. to ISLAND to buy at the ask and sell at the bid (if ISLAND is not the one with best price, they route it further if I understand correctly).

    So if I understand correctly, the pro programs would actually take a SMART routed order, find the best venue, and get the order out faster than TWS will deliver the order I described above to ISLAND? Curious which time frames we are talking here. Would be interesting to see some actually measured comparisons, between time from submission to execution, and resulting slippage (on average of course).

    This information might be a huge selling point for the pro programs, surprised they do not publish such studies for advertisement. (Or maybe they do?)
  6. MrMuppet


    I guess you've got that idea from a 20 year old trading book. ISLAND has been bought in 2002 and doesn't exist in it's old form anymore. Also you probably missed REG NMS.

    Just forget about it and continue using TWS. What is happening on a micro/routing level is currently way above your head and you will have to study at least half a year until you understand what's going on.
    rb7 likes this.
  7. Kaga


    That's interesting! TWS lets me direct route to ISLAND, which is where I got it from.
    I'm not opposed to studying for half a year, haha. If you could tell me where to find the information?
  8. qlai


    Why do you need to learn it if you want zero commissions? I assume you mostly take liquidity, so can’t expect to get it with direct routing(brokers would be eating all the fees). Imho, only worth it if you collocate for both execution and market data (very expensive)
  9. Kaga


    No, I don't want zero commissions. In fact, IB charges 0.003 per share on directed orders, and gives you rebates if you provide liquidity instead of taking it.
    I am rather interested in reducing slippage on entries and exits.
  10. qlai


    Oops, I confused you with another guy asking similar question on another thread.
    #10     Mar 10, 2022
    max21ge likes this.