This might be of interest to some since more firms are about to start using the instinets DAT platform which I think is the best out there right now. I'll post the article below which is mainly about it's evolution but mainly notice the the part called "Grabbing the Reserve" where it talks about their SmartRouter and how it can grab the entire reserve in one go where as if you were using say ARCA it would possibly take a bit longer to access that liquidity because it takes the "displayed amount over and over. If the displayed amount is 1000 and you are trying to get 5,000 shares seems to me like this smart router thing might be a nice edge to have even if it is only a couple of tenth's of a second, cause as you know sometimes when you just miss liquidity at one level, the next level can feel like a hell of a long way up. Article is from Aug. __________________________________________________ An Open Door at Instinet: Smart Routing Changes Face of Electronic Broker Peter Chapman Instinet is no longer a closed shop. The ECN is promoting a new direct access front-end that makes it easy for customers to access other trading venues, as well as the Instinet book. The product's launch suggests Instinet's evolution from a quasi stock exchange into an agency brokerage is almost finished. Portal, as the system is called, incorporates "smart-routing" technology. That allows a trader to swiftly search the entire market for an execution. It also replaces OMS, Instinet's legacy front-end, which gives traders only rudimentary out-bound routing functionality. Closed System Smart routing has been a standard feature of many ECN, vendor and electronic agency broker systems for the past few years. But until recently Instinet did not embrace the technology, a decision that cemented its reputation as a "closed" system. Instinet began life 30 years ago as a quasi stock exchange for institutions in competition with the New York Stock Exchange. Orders came in and either filled, posted or cancelled. Unfilled orders did not travel to other market centers. In recent years, though, Instinet has made moves to refashion itself as an agency brokerage, seeking the best execution point for its customers even if that wasn't its own book. But the technology supporting that book, its biggest money-spinner, was not particularly adept at routing out, even its own execs admit. OMS does allow traders to route out, but the process is cumbersome and time consuming. Traders must type out the instructions. Then they must also wait while the system scans the entire book before routing away. Portal eliminates that "stickiness," Instinet execs say, with the smart routing and a more flexible point-and-click GUI. Portal's GUI (graphical user interface) was borne of gr8trade, the direct access front-end Instinet acquired when it bought ProTrader last year. The system (pronounced, "great trade") was designed to meet the demands of rapid-fire day traders. But smart routing and a sporty GUI aren't enough for Instinet's institutional clients. Unlike day traders, who continuously buy and sell small lots in rapid-fire fashion, the pros need to move large blocks undetected. To accommodate them, Instinet made several sophisticated block trading algorithms available with Portal. By using such features as pegging, spraying, reserve and discretionary pricing, big ticket traders can camouflage their intentions. Still, all of these features - a good GUI, smart routing and smart algorithms - are quickly becoming standard on direct access systems built for the buyside. Instinet needed an ace to stand out. Instinet's trump card is a book widely considered to hold more large orders than any other ECN. "We have more institutional liquidity than anyone else," boasted Mike Plunkett, a senior vice president and managing director in Instinet's hedge fund group. "That's the difference." To date, 126 firms are using Portal, says Plunkett. The bulk are hedge funds. The rest are traditional money managers that Instinet terms "actives." In total, Instinet services 700 hedge funds and 250 actives, according to Plunkett. For Portal, Instinet has set its sights on a universe of 1,500 hedge funds, those with assets under management of at least $5 million. Here is a laundry list of some key features: Part II follows in a sec. I am having to break the article up. Avalanche.
Point-and-Click Trading Traders do not have to type price and quantity data into an order field to execute a trade. They simply point to a price on either the bid side or ask side of a Bid-Ask window and click. Then, an Order Ticket window pops up with a predefined quantity ready to go. The trader then clicks the "Destination" button in the Order Ticket window. Destinations are ECNs, market makers and the SmartRouter. The trader clicks a destination and off the order goes. Portal has direct FIX connections to all major ECNs except Brut and LightSpeed. That includes Instinet, Island, Archipelago, REDIBook and TradeBook. Smart and Fast Routing One of the most significant changes under the Portal regime is the trader's ability to bypass the Instinet book. He can preference another market center or send his order directly to the SmartRouter which will scan the entire market for a match. If the best price happens to be on INCA, the order will route there. If it is on another ECN, the order will route there. The order will not-as it does under the OMS regime-journey first to INCA, scan the entire book and then become available for on-routing. "There's a little bit of latency," said Plunkett of the OMS process. "Anytime you add a layer you get latency." Portal is faster, he adds. Two Ways to Spray Using SmartRouter, traders can choose two different methods to sweep through multiple price levels when buying or selling. Price-sensitive spraying ensures a trader buys or sells only those shares with the best prices. Time-sensitive spraying allows traders to ignore prices for speed. Time-sensitive spraying can take slightly less time than price-sensitive spraying, according to Instinet. It is aimed at those traders who want to buy or sell in quantity as quickly as possible. While the trader is unable to avoid displayed orders, he can set the smart router to skip certain reserve orders. That speeds him on his way. "There are clients who wouldn't mind missing stock at four cents and paying five cents just to get their order done," Plunkett noted. The system default is time-sensitive spraying, though. Grabbing the Reserve The advent of the penny increment has made it cheaper to compete for liquidity. That has discouraged block traders from displaying in size. They don't want their large orders to encourage someone else to jump ahead of them in line with a slightly better price. So, they hide more of their order in an ECN's reserve facility. A seller of 50,000 shares, for instance, may display 1,000 and hide 49,000. Instinet execs argue that efficiently accessing that reserve liquidity means using the right smart router. Although most smart routers can access the Instinet book, only Instinet's SmartRouter can grab the entire reserve in one go. Instinet does not allow other vendors or ECNs to access its reserve orders. Other smart routers must take the displayed amount over and over until the reserve is exhausted. That takes time and could force the trader to compete with others for those little pieces. He may end up with only half of what he needs. "A lot of liquidity tends to reside on Instinet which is what makes our smart router a little more powerful," said Bill Cody, an Instinet vice president of institutional equity trading. Hiding in the Weeds For the same reason reserve orders have become more popular - penny ticks - use of discretionary pricing is on the upswing. Instinet execs say close to 75 percent of their customers use the hidden limit orders, up from 50 percent a year ago. Big ticket traders are refusing to quote at the market's best prices because it only costs a penny for another trader to start a bidding (or offering) war. To deal with this problem, Portal users can quote at a price inferior to the NBBO, but instruct Instinet's WinPeg mechanism to buy or sell at or around the NBBO. That way they avoid the limelight, but are still able to trade at a price they deem suitable. Assuming a spread of $10.20 to $10.30, for example, a buyer may post a bid of $10.18 and input a $10.25 top into WinPeg. That way he can grab any offers that post at or below $10.25. He is also still available to be hit and, as he is outside the inside, is unlikely to set off a bidding war. "Everyone wants to buy or sell as much as they can without letting anyone know what they're doing," Plunkett explained. "They always put these hide in the weeds' types of algorithms on their orders. That way they can participate at a certain price, but not let anyone know." Instinet advises its customers to use SmartRouter to first search for liquidity in the market, then use WinPeg for the leaves. To Float or Not to Float Instinet's WinPeg discretionary pricing allows traders to create discretionary prices that either float with the market or remain fixed. Click "Primary" and the order price floats along at whatever the best bid or offer is at the moment. In other words, a trader is always willing to buy or sell at the best price in the market. (Traders can also peg their tops or bottoms to float slightly above or below the best bid or offer.) Click "Mid" and the order price floats along at whatever the midpoint between the bid and the ask is at the moment. Click "Best" and the order price pegs at the best bid or offer at given a point in time. It does not change. If the best bid was $10.30 at 9:31 a.m., the trader's top will stay at $10.30 for as long as he wants. Gaming the Gamers Because the market knows block traders use discretionary pricing and reserve to camouflage their intentions, some players will try to use the technology against them in order to flush them out. To protect themselves, Portal users can fine-tune their WinPeg strategies to evade traders trying to game them. The Scenario: A trader wants to buy 75,000 shares. The Strategy: He displays a bid of $30.75 for 1,000 shares and holds the balance in reserve. He instructs WinPeg that he is willing to pay up to $30.85, but only in lots of 5,000 shares. The Possibility: If a sell order of 5,000 shares or more posts, the system will grab it. Anything less, the system ignores it. The Rationale: Gamers trying to flush out a big buyer will purposely post small 100-share sell orders to assess buying interest. They will price those orders high to see if anyone will pay. If they think they've found a big buyer, they will start buying stock and wait for the big buyer to pay up. The Pitch: "Once someone comes up with a game like that," Plunkett said, "then we have to come up with a way to help the client. So, now you don't have to pay up there unless there's something meaty available."
I have heard that some RealTick brokers may be switching to Instinet clearing. I assume they will offer this package then.
http://portal.instinet.com/html/documents/PortalSmartRouter.pdf Can a moderator or someone consolidate this thread and the other one which are morphing into the same subject.