This question is perhaps geared towards the individual who looks at the micro picture of trading. I understand that adding liquidity with EDGA you pay and taking liquidity with EDGA you get a rebate. Also, I understand that EDGX you get a rebate for adding and pay to take. My EDGA orders have been getting filled with priority for this very reason. Traders are using EDGA to take liquidity, thus it's getting routed to the EDGA orders on the B/A. Now, if someone knows the indisyncricities of routing... say on the bid 200 EDGX 200 EDGA 200 NYSE and someone hits the bid for 200 routing through EDGA-- who will get filled first? similar question but in this senario, someone hits the bid for 300---who will get filled and in what order? Does EDGA have priority over EDGA or are thye interchangable in this regard and it becomes a FIFO issue? Any and all responses would be appreciated! j
What you'll find on EDGA is a bunch of resting limit orders that want to get filled first, and, because liquidity takers want cheaper costs, those EDGA limits will, more often than not, get filled first. If a seller has direct access to the EDGA route, the seller can specify the lowest cost option. For the 300 share MKT sell order, 200 will go to EDGA and then to the next lowest cost for taking ECN. The ECNs are all offering liquidity in this case and there is no priority among them. The seller has the option of which ECN to take from at all times. For example, IB's "SMART" route can be configured to always hit the best rebate ECN, but, not at the expense of worse fill price.
So if someone was aggressing an order on the bid via EDGA ~~~ The EDGA would have priority over EDGX and NYSE ~~~ Would the EDGX have priority over NYSE if there wasn't an EDGA available and the order was routing via EDGA? Thanks!
Well, it depends on the bids and the taking fees. First, who has the best bid? Second, will NYSE be cheaper to take from, or will EDGX be cheaper? Also, there is no inherent priority here, its what the sellers order routing algo is confirgured to do...
There's no such thing as priority amongst the ecns. I.E. NYSE having priority over EDGA, etc. That does not happen. Typically, the ecn with the lowest cost to take liquidity (CBOE, BYX, EDGA,NQBX) gets taken/hit first, however if someone chooses to route his order to a more expensive venue (many people/"smart routers" will do just this) then that more expensive venue gets filled first. To summarize: no ECN has priority over another ECN, however the most expensive ECNs tend to get taken last and the cheapest ECNs get taken first, assuming the market participants are acting rationally.