ECNs vs. Market Makers

Discussion in 'Order Execution' started by DreamTrader, Jan 26, 2011.

  1. Hello, everyone. As a stock trading newbie, I have a question about trading venues. I haven been practicing paper trading and hope to join a prop in the future. While paper trading, I do not get opportunities to select a trading venue such an exchange (NYSE or Nasdaq) or an ECN (such as Acra or Inet). I learn that I need to route trades to a venue when I trade with a prop. As the result, I educate myself about ECNs. By the way, I trade highly liquid stocks and I am not a scalper.

    Recently, I am surprised to find out that props use market makers (MM) such as NITE or VNDM. I want to learn more about these MMs. What are some advantages and disadvantages of routing my trades to, for example, NITE? I was told MM such as NITE charge traders less ($1/1000 shares) for removing liquidity than some of ECNs such as ARCA ($3/1000 shares). Is this true? Where can I get a complete list of MMs available for props? Are there any differences among those MMs? Most importantly, how likely are my trades get filled by using these MMs?

    Any guidance on this issue is greatly appreciated. Thanks.
  2. rosy2


    those firms and any other "execution services" firm pay for orderflow.
  3. Dear rosy2. Thank you for your reply. Should I use them when I trade with a prop? I know there is routing charge, but it seems a bit cheaper than ARCA. Thanks.