ECN routes

Discussion in 'Order Execution' started by exoticoption924, Nov 14, 2009.

  1. The EDGA route is the cheapest route that can be used to remove liquidity. In fact, as of Nov 1 2009 EDGA is offering a 2 cent per 1000 share *rebate* for removing liquidity (but charging 2 cents per 1000 shares to add liquidity).

    My question is, why is it that EDGA is not the first to be hit (whether on the bid or offer) when any orders are coming through to the market? If I were a broker or client executing a trade I'd want to find the cheapest route possible and hence go there first. Only if there is no liquidity on the free route (EDGA in this case) would I go to an ECN that charges to remove liquidity. But what we see in reality is that EDGA only starts printing when a level is starting to clear. Based on how I'd expect things to work, EDGA should always be the first ECN to get hit when orders come through, but most of the time what we see is that BATS, ARCA, NSDQ, and other ECNS that cost money to remove liquidity will be printing.

    I hope I'm making sense here. If you have any insight into this issue please explain. Thanks.
  2. I have no specific insight (which is what you are asking for ... sorry!), but here are some ideas (best I can offer, I’m afraid!) ...

    a) “cheapest route” … that’s only a part of the best possible execution of a trade. If, on average, the spreads aren’t as narrow on EDGA (perhaps they are?) or the market not as deep at each level, then on average a trader may not get the best fills, even if the route is “cheaper”.

    b) And “cheaper” to who? If the broker keeps any of the rebate, I suppose the broker lays itself open to traders accusing it of taking kickbacks rather than putting its own clients’ interests first, i.e. not offering them “best possible execution”.

    For reasons like the above, EDGA is not always going to be the first hit.

    What do you think?

    Any of this make sense?
  3. i believe edga has a route option called ROUC.. that hits EDGA, then NQBX then sends to specialist .. .which is the cheapest combination for trading nyse.
  4. telience


    What stocks are you looking at, exactly?

    What kind of execution options are there for removing liquidity under the new rebate?
  5. super9


    good day! :)
    Tell me - how to determine the value ruoters when trading stocks
    please help me - Tell me - how to determine the value ruoters when trading stocks. i am trading in genesis, laser.
    please help me understand the value ruoters - or please give me links to further information to clarify this information. will be very grateful to you for help
    sorry - i bad speak english...
  6. 6pst6