To those of you who have more experience trading with ARCA...let me give a hypothetical trading scenario. Let's say I want to buy 1000 shares, and at the inside ask there are a total of 1000 shares available through various ECNs (but no market makers) I realize that if I place a trade through each ECN, the trades will go through instantaneously, but it will take me several seconds to enter all those orders. If I just use ARCA, how quickly will that order go through? Am I losing milliseconds? Seconds? Remember, I'm assuming no market makers to preference. I'm also assuming that I'm the first one to take the offer.
It will be quick enough that it won't matter. If a mm shows up there, you're screwed cause it goes to snet and he has 20 something seconds to hold you. If you want, you can use cybercorp ecn sweep, or whatever similar software your broker has. If it were just 100-300 share on each ecn, i'd arca it. Otherwise, I usually just hit each ecn individually. Hit hte biggest one first so you get out of the majority of your shares. But I have a VERY quick trigger finger.
Even if a market maker is present on the inside offer, it won't matter as long as there are enough orders sitting on the ECN's. ARCA will always hit the ECN's first, then preference any market makers. I thought the mandatory time for a MM to respond to a preference was now down to about 10 seconds, although that can feel like 10 hours when your stock is moving in the wrong direction and you just want out!
Just to test it out, I bought 100 shares through ARCA when the inside ask was REDI, then sold when the inside ask was INCA. In both cases, it took about 5 seconds. Why would it take this long? I am using IB; I don't know if that has anything to do with it.
You already have the shares, or they can't pull them when they see the arca overhang. The shares have already been taken i think. It just takes a few seconds for your trade confirmation.
100 shares 5 secs? Nope. I have been with MBTrading, now Terranova-MB and I use the RealTick platfrom. At first, I hated to use the old ARCA route because it preferenced MMs as well. But now I use and use only the new ARCA-NOW route which creams off ECNs only (BTW I configured my L2 to only show ECNS, no MMs). Have been using this for 3-4 months now and if the L2 does show the number of shares you need and at the right price/s, enter the order quick and you will see your orderbook fill up immediately (usually 1, at most 2 secs for confirmation of typical 1000 FULLY executable* shares, yes 1000 ) But do bear in mind if the shares available at the executable* prices is thin, there may be some other L2 traders that could have been faster than you. Again, have a look at your Talnet's inbytesqd to see any lag(for realtick users) to make sure your quotes/timesales are timely. You may think you should get an execution on an otherwise lagging quote/timesales * what I mean by executable prices is buying on ask, selling on bid. No posting (posting or your own market-making depends whether the market moves back to your post for it to execute, that may take anywhere from 1 sec to indefinite ) I suggest you take yourself to the nearest L2 trading room to see other traders at work on their L2, and see how they react to prices seen on their L2 and how fast they fire an order and how fast it fills up. I don't use IB, I liken them to Datek Direct. I use Realtick because I can see ALL quotes from ECNs and MMs, and importantly MY own post on the L2 screen, and which other posts on the ask my buy order matches against. It gets no better than that. If you are really serious trying to earn from the market for a living, have a look at L2 platforms. Realtick is one of them which I personally consider the premium solution. You don't need technical problems to give you headaches or confusion when you should really be concentrating on the market instead.
Actually I have level 2 software. I typically use IB after hours. I'm just trying to figure out if IB has some kind of delay with ARCA, or maybe if the trade is getting reported on my system late. With ISLD or REDI, the trade goes through and is reflected almost instantaneously. But I know that INCA doesn't seem to go through that quickly with IB. So maybe their ARCA link is a little slow. I just don't feel like testing out ARCA with my level 2 broker and paying a full ticket each way.
I didn't mention. With inca, when arca preferences ecn's, inca is last. This gives inca time to actually pull away. I know it's awful, but those institutional guys wouldn't want you to take their "fake" size. Honestly, when there's news, and inca shows 10k and trys to scare you into their waiting redi bid, if you try to take a few k from inca, you have to use inca only. Cause they will be able to pull away from arca before arca prefs them.
Your problem with ARCA is due to IB's awfully slow link to ARCA. Like INCA this makes ARCA practically unusable with IB for anything that moves. IB has been promising an upgrade to their INCA link to resolve the delay problem for over half a year now and it's probably not worth holding your breath for this to be resolved anytime soon. Try REDI instead. This will also avoid the problem with INCA that praetorian mentioned since REDI prioritizes its routing choice among ECNs purely by size shown.
dlincke I've hardly used ARCA with IB, so thanks for your experience with it. Your mention of REDI brings up an interesting question. I've always heard that REDI does the same thing that ARCA does, first attempting to match within its own book, then looking at all other ECNs, then Selectnet with market makers. But I have seen numerous times (after hours; I don't know if that is the problem) when the inside market is locked, and REDI is on the inside market. For example, there might be 1000 shares bid at 50 through REDI, and 500 shares offered at 50 through ISLD. And sometimes it just sits there for a while like that; in other cases, I've seen the orders match each other, but only after several minutes. I would think that REDI would immediately match with that ISLD order. I think that it is possible to place a REDI order that will only look within its own book; I don't know whether that is the explanation. Does anyone know why this might be the case? Praetorian You mentioned that ARCA preferences INCA last, and that he has time to pull away. I'm not sure I understand. I thought INCA was just like any other ECN; you advertise your quote, and it's fair game. How do they have time to remove their quote, and how can they do it in the first place? Do some of these institutional traders get a message that someone is trying to preference them? And is there some kind of time lag when ECNs are preferenced?