Instinet price improvement?

Discussion in 'Trading' started by samtrader, Dec 9, 2001.

  1. Is there a price improvement on marketable limit orders sent directly to Instinet?
    Let's say the market is 30.00-30.05 and I sent a BUY limit order @ 30.10 (using Instinet). If the Instinet book has orders of 30.06, 30.07 and 30.10, would I get some shares @ 30.06 and 30.07, before I get any @ 30.10. Assuming that my order is large enough.

    Also, how much of an overall speed/fill reliability improvement would I see if I would sent an order using a direct ECN link, instead of using automatic routing like Redi or ARCA? For example, if on the Offer there is Redi, Isld and Inca each posting 1,000 shares at the same price. Would I be able to get ANY of these shares FASTER using a direct ECN order, instead of an auto-route order?

    Thanks for Your help,
  2. Turok


    >...would I get some shares @ 30.06 and 30.07,
    >before I get any @ 30.10.

    Most definitely.

    >if on the Offer there is Redi, Isld and Inca each
    >posting 1,000 shares at the same price. Would
    >I be able to get ANY of these shares FASTER
    >using a direct ECN order, instead of an auto-
    >route order?

    Yes, almost without exception it will be faster to go direct. That of course assumes that both orders are sent at the same time...if you don't have a well thought out, implemented and practiced system for routing the orders yourself, you could actually be slower. That is to say that the delay you introduce personally could be great than the delay ARCA introduces.

    I myself find the ARCA delay to be greater for my own purposes, but as Magna pointed out on another thread, the real value in an active ECN comes when you are trying to move size enough that you often end up routing to multiple sources -- a computer is of course typically better at that than we are.

    I answer the question the way I do because I kind of figure that if a person is asking this sort of a question (and it is a good one BTW) they should no be attempting to move size.

  3. One thing different (and potentially better depending on circumstances) is how INCA treats your marketable but UNFILLED order once a match eventually comes in.

    Using your example, let's assume you were buying 1000 shares but that you missed the shares at 30.06 and 30.07 and only got 500 at the 30.10, leaving you 500 shares still to buy with the best INCA offer sitting at more than your 30.10 limit price.

    My understanding is that INCA will actually re-price your order to the inside price level (inside offer in the case of a buy order), which would be the 30.05 in this example. However since displaying this bid would currently lock the market, INCA then adjusts the order for display purposes and shows it as a bid at the highest displayable price of 30.04. Finally, when some other INCA trader goes to join the offer to sell, or even hit the bid, the orders will match and be printed at the 30.05 offer price.

    THis is no doubt a little confusing, but compare it to ISLD which would take the 30.10 bid and similarly display it at the 30.04 price level, however when a ISLD seller comes in to hit the bid, join the offer, or otherwise sell for 30.10 or less, the trade takes place at the 30.10 limit price and the seller gets nice price improvement, but you pay more than you had to in this situation. Again, not necessarily better or worse as it depends on the conditions, ie in a super fast market your priority may be just to get filled etc. but interesting how INCA and ISLD handle similar situation in much different fashion.