1- If my NX, you mean "Limit-NX", as offered on REDI+, then yes, it is the same as NYSE Direct+. For Direct+, check out: http://www.nyse.com/pdfs/NYSEDirect.pdf
I was told by IB that anytime an order is routed to NYSE (either by choosing it explicitly, or when chosen by IB software via BEST), that if the order is 1099 shares or less, it is sent via Direct+. Direct+ at NYSE checks the order at time of receipt. If it is not marketable, it is passed to specialist. The other thing to be aware of it that once somebody has been filled on it, the specialist gets a chance to move his quote. Not sure if this means the entire quantity or not -- i.e., I'm not sure if the entire quoted amount needs to be filled for him to get to move his quote or not. But I do know for certain that if it shows 1000 and somebody sends an order to buy 1000 (and you do too), the first one will get it, and the second will get a nice long pause, even though the order was sent via direct+, while the specialist decides if he wants to fill you. On REDI+, I've noticed another thing: If you choose Limit (not limit-NX), and you send your order for 1000 shares, the specialist still sees it, and you do not get auto-ex. I've also noticed that it doesn't seem to let you send more than one order in a row, both as Limit-NX (which REDI says directs it to NYSE DIRECT+), the second one doesn't get a quick auto-ex. I'm not sure, however, if that's a function of REDI or NYSE.
Replying to my own post, you can't sned more than 1 order on the same side of the market in the same stock more than once every 30 seconds. I suppose that's to stop you from programming your software from jumping on a 5000 share offer with 5 quick 1000 share bids. *shrug*
I looked at the link, thx. But this raised more questions than it answers. For example: 1) "Automatic execution limit orders up to 1099 shares against published bid or offer, with execution times averaging 2.5 seconds." OK, got that - though this is an ECN? Why should it take, say, anything more than 10 milliseconds to execute? Perhaps they mean including confirmation? 2) "No opportunity for price improvement." OK. Although they could have been less cryptic and said (assuming I am correct in my analisys) "If price is executed _AT_ Direct+, then you have no possibilty for price improvment, unless it is not immediately executable, in which case, as per 4) below, it becomes a regular SuperDOT order, and of course you may get price improvement there." 3) "NYSE transaction fees - specialists can not charge a commission if executed withing five minutes." HUH? If it is not "immediately executable" as per 4) below, what stays where for FIVE MINUTES? It seems that an order can only _BE_AT_ Direct+ for no more than 2.5 seconds? 4) "Reverts to a regular SuperDOT order if not immediately executable." This one really confused me. How can an order ever be at Direct+? I mean, if it is not "immediately executable" then it gets routed away from Direct+. Well, how can this form a "limit" book then, the way ISLD or other ECN's do? Unless two traders "simultaneously (within that 2.5 seconds as per 1 above) send in matching orders, nothing can ever be executed at the NX? 5) "If a better bid or offer exists at another marketplace, the order will be routed to or executed at the better price." Well, this flies in the face of 4) above. What happens if say, just hypothetically, that both the Chicago Stock Ex. and SuperDot show the same quote, who gets it? I supect that NYSE does... Finally, do _ALL_ IB limit orders get sent to Direct+ first, whether I choose BEST or NYSE? nitro
Okay: Re: 1) NYSE Direct+ is NOT an ECN. Just a special way of submitting orders sent to the NYSE. Re: 2) Your take on #2, above, is correct. Re: 3) Number 3 is basically a marketing thing. Pretend nobody wrote that. If it stays with direct+, it will be executed right away, thus no fee. If it reverts to superdot, then all bets are off, as the specialist can then screw with it, etc.. Re: 4) See my response to #1. Direct+ is not an ECN. It does not have a separate order book. Think of it this way -- the NYSE maintains one order book for each stock. The specialist oversees the book. Orders can get into the book one of a few different ways. One way is via SuperDot, which is the normal way. That means that the order goes into the book, and the specialist gets a chance to change his quote, give price improvement, trade the order etc.. Then, as a marketing gimmick, they added an additional way of processing orders, and have marketed it as "Direct+". If an order is flagged for direct+, and is 1099 shares or less, and is immediately executable, then it interacts directly with the opposing order in the book, and does not get sent to specialist. Because it doesn't get sent to the specialist, there is no opportunity for the specialist to price improve. Because it is executed immediately (at least as a partial), there is no opportunity for the order to sit 5+ minutes, which means the specialist doesn't get an extra fee from you. If the order doesn't meet the criteria (must be sent via direct+, must be for 1099 shares or less, must be immediately executable (marketable), must be against a firm quote), then it turns into a regular superdot order. The same is true when there is a partial execution. For example, if there were 500 shares on the offer and you bid for 1000, you will get the first 500 immediately via direct+, and the 2nd 500 go into the order book in the regular way, via the specialist. The specialist might fill you on the 2nd 500 at the same price as the first 500, he might price improve, or he might move his quote, leaving you on the bid. Re: 5) Regarding this question, if the same price is posted on chicago and nyse, the nyse will get it. Why? Because you sent your order to the NYSE. As long as they are giving you NBBO or better, the order stays there. On the other hand. Say the offer is at 10.50 for 1000 shares. You bid 1000 @ 10.50, expecting to take out that offer. However, before the NYSE (via direct+) receives your order, chicago stock exchange comes in with an offer of 10.49. Because 10.50 is no longer NBBO, your order is then routed away to the other market center (chicago, in this example). In that case, you will not receive an instant execution, because your order is then being processed by chicago stock exchange, and whatever rules they may have. In this case, you might get no fill at all, or may eventually get a fill from the other exchange. I think (but am not certain) that in this case, the NYSE specialist gets a chance to fill you at 10.49 or better, or allow the order to be routed to the other exchange. (Can anyone answer that one?) Regarding the IB question, I'm not employed there, so take this with a grain of salt. But the guy I talked to at IB said it works like this: If your order gets routed to the NYSE, either via "NYSE" or via "BEST", if it is for 1099 shares or less, then it is automatically sent (every time) to the NYSE via Direct+. Hope this helps.
Okay, I got everything else in your post, but one thing is still a mystery. "...Then, as a marketing gimmick, they added an additional way of processing orders, and have marketed it as "Direct+". If an order is flagged for direct+, and is 1099 shares or less, and is immediately executable, then it interacts directly with the opposing order in the book, and does not get sent to specialist. " From everything you have said, the _ONLY_ difference between using Direct+ and having an order routed to SuperDOT is that if routed to SuperDOT, the specialist (or his clerk) has to look at it, make some decisions, like match the order, move his quote up/down, etc, whereas if I route to NX, all I am doing is bypassing this _TIMELY_ decision process. So, Direct+ isn't used to get faster fills if I happen to match something in the "book," because it is done electronically. This if my analysis is correct, is more than a "marketing gimmick" and a real advantage. Of course, I have not analysed what happens when there is no order matching, and then I loose some time (2.5 seconds) extra getting routed to SuperDOT, etc, which means that had I been routed _DIRECTLY_ to SuperDOT, my order was not dancing around when it could have executed by the specialist 2.5 seconds ago, actually making it SLOWER...??? nitro
Sort of. The main thing wrong with what you wrote above is was " Direct+ isn't used to get faster fills if I happen to match something in the "book," because it is done electronically.". The matching only happens when the specialist says it's ok to let it happen -- i.e., he declines his opportunity to price improve. See below... I didn't mean to say that "direct+" is entirely a marketing gimmick, because there IS a real advantage -- speed and certainty. Direct+ tends to actually GET you the fills, AND get them more quickly. Without it, you often won't get the fills: If the specialist sees a whole bunch of orders attempting to jump on an offer, he will often take it for himself (filling it at a slightly higher price), and leave all the other orders on the bid, then sell it back to them a minute or two later at a higher price. You have to understand that the specialist doesn't have an incentive to get your orders filled quickly. In fact, just the opposite is true. I think the number is 90 seconds. He has 90 seconds to decide what to do with your order (and another 90 seconds once you put in to cancel). For example: A stock is 20.10/20.20 with 100x100 showing. Trader #1 offers 1000 shares at 20.15. The specialist sees this, and senses a good opportunity to see how many buyers he has out there. So he lets the order show. (Trader #1's order doesn't show instantly or automatically until the specialist allows it. By default, it's held up for a few moments to allow the specialist to decide to price improve it, or fill it, etc..) Now the bid/offer is 20.10/20.15 with 100x1000 showing. At that time, you decide to buy. So he sends an order to buy 1000 @ 20.15, expecting to take out the offer. At the same time, 4 more traders do the same thing. The specialist sees this flock of orders coming in, so he senses that the buyers were more eager than he had previously thought. Now the specialist isn't allowed to trade in front of customer order flow. Which means, since there are 5 orders (yours plus 4 more) trying to buy 1000 shares @ 20.15, he cannot buy the 1000 shares in front of you. But he has another choice. He can buy it at 20.16. So that's what he does. The specialist fills Trader #1's offer a penny better -- thus, that trader received price improvement -- he was trying to sell at 20.15, but actually got filled at 20.16. In receiving this price improvement, he realizes he was probably selling too low (which will become apparrent as he sees the market move up over the next several seconds. Meanwhile, the rest of the world is still waiting to see their order to show up, or get their fill. Finally they see the following: 1000 shares trade at 20.16. ("Crap!", they say.) 100 shares trade at 20.20. Then the quote changes, and the market is now something like this: 20.15/20.25 with 5000x100 showing. The specialist bought the 20.15 offer a penny higher, and the 100 shares at 20, just for good measure. Now the quote shows 5000 bid for -- the 5 orders for 1000 shares each, and the specialist is offering 100 shares at .25 now. Maybe somebody will panic now (perhaps a short-seller, seeing the strong buying interest), and jump on the 100 -- or better yet (for the spec.), several somebodies will jump on it, giving him a chance to sell his 1100 shares nearly a dime higher. Anyway, I don't think routing to NX slows anything down. The document says that fills usually come in an average of 2.5 seconds. But that doesn't mean a 2.5 second delay for your order. I mean really, it's not like it's a complex process -- assuming you're buying, if your bid >= inside offer and offer is firm (not already filled -- waiting for specialist to move quote), give fill. Else process order normally.
In this case you will receive an NYSE Direct Plus execution at 10.50 no matter what any other exchange is quoting. This holds true even if some regional exchange should be quoting at a price superior to the NYSE at the time of order submission. Based on my own trading experience I don't think that IB uses Direct Plus at all. I receive price improvements all the time on limit orders sized 1000 shares and smaller that are priced at the NBBO. In fact I've been requesting addition of a separate Direct Plus order route for almost a year now. Last thing I heard was that it was under consideration as a new feature. Dave
First, this is an incredible thread! The almost total lack of any substantive information on order routing and other tech issues at IB is frustrating. It's nice to know that there are some other IB traders that actually care about this stuff Like Dave, my experience also leads me to think that Direct+ is not used, despite IB having said that it is. It's odd, too, that they told Dave that what was supposedly already implemented is under consideration as a new feature.*** I almost always get price improvement on marketable limit orders sent to NYSE, and the orders usually take at least 30 seconds to fill. What I usually see on the tape is a much larger print at the same price. In contrast, I think the orders that auto-execute on Direct+, against the quote, generate a print with an "E" condition code (S&P data via myTrack), for the same size as the fill. If, indeed, they are routing to Direct+, it would imply that the NYSE quotes are somehow non-firm much of the time, or that the BEST quote is not showing the NBBO, but instead showing just the NYSE market. *** Often, I think the IB customer service people get BS answers from their programmers just to get them off their back. Some of them (like Def) react by pursuing the issue when the answer doesn't ring true, while others don't have the experience to do anything other than take it at face value, while still others are probably too intimidated to take it to them at all. This accounts for the widely varying levels of service that we receive, and really should be looked at. Unfortunately, having managed programmers (and being one), I can understand just how difficult a problem that can be to resolve