I had posted links to a level 2 order routing course that had been posted in an online DaytradingUniversity seminar. They discussed topics such as SuperSOES and other level 2/order routing issues. I have since purchased the entire course from the www.tradecourse.com site and I think it is great. It is narrated and has re-created level 2 and order routing scenarios which make it a lot easier to learn. I am not recommending anything or trying to persuade anyone, I just can say that it honestly helped me with alot of the same questions. There was even a module on your exact question on routing ISLD orders at prices outside the inside price level, as well as one on SuperSOES. Any way the links to the samples I posted earlier were: www.tradecourse.com/modules/shorting_execution.htm www.tradecourse.com/modules/soes_examples.htm www.tradecourse.com/modules/ecns_illustrated.htm Steve Level
I would like to clear up a few things regarding routing as discussed by people on this thread. I strictly trade Nasdaq and I have exclusively used either direct ISLD or CyberXchange ECN (prior to SuperSOES) or CyberXchange Limit. I suspect CyberXchange's routing algorithm is similar to Arca's or Redi's (neither of which I've used) in that it first checks the ECN's for inside price and if not available SuperSOES the MM's at the inside (assuming it's an NMS stock compliant with SuperSOES). I take it that's what Qwik meant when he said: both redi and arca will automatically scan the market for the best available price and route your order accordingly Later Qwik said: if you are trading a stock that is 102.01 x 102.05...with isld if you accidentally enter the order at 12.01 and there are no bids for a couple dollars down, youre screwed I assume he means no bids on ISLD, and yes, in that case you would get filled at the best ISLD bid. So if the best ISLD bid was a few dollars below the best MM bid (I doubt the best ISLD bid would be much below another ECN's best bid) then, yes, you would be screwed. And that's because you're not using a smart algorithm that checks both ECN's and MM's. And not checking Level 2 before placing your order. Later Htrader said: Direct island orders only execute against the island book, thus you may not be getting the best market price. I realize when I was referring to price improvement on an ISLD order I meant within the Island book. So that if I did a sweep, say, .25 below the best ISLD bid it would start at the best bid and fill me on down to my limit price until I had enough shares. Later Voodoo said: Don't avoid what is clearly one of the best execution platforms just because you are worried about entering the wrong price. I assume he was referring to ISLD and, if so, I agree because while I may not always get the absolute best inside price, on any liquid stock I'm rarely more than a few pennies off. And the utterly instant fills make it worth the tiny cost, if any. Even with that said, I suppose the smart algorithms, in this era of SuperSOES, provide additional advantages for a very small tradeoff in time, by checking all ECN's and MM's. Has that been everyone's experience? And, if so, is there any advantage of ARCA or REDI other than differences in ECN costs from broker to broker?
THe only issues between ARCA vs REDI relate to which/now many ECN's can be accessed via ARCA/REDI via direct connections. I have lost track and should probably find out, but when there is liquidity from another ECN with which ARCA/REDI does NOT have a direct connection, then they access the other ECN via a SNET preference. This slight delay going thru SNET can make the difference in getting the shares or not getting them in a fast market. Taking this one step further, I have seen traders on Watcher and similar platforms get shares I would never get on Realtick. THey do so by having direct connections with all ECNS built right into their systems and hot keys set up for each. With well developed order entry skills, they are lighning fast. They watch the screen and see Brass volume..bam..got it. Btrd volume..bam...got it. Attn volume..bam...got it. It is amazing to watch a good one...like playing an instrument.
DATTrader, The only issues between ARCA vs REDI relate to which/now many ECN's can be accessed via ARCA/REDI via direct connections. Good point, just assumed they would have direct access to all the ECN's. Obviously not, eh? CyberXchange does, do you know which ECN's that ARCA or REDI cannot directly access? As SelectNet is a dog that I don't care to be crippled by again, extensive ECN direct access would make all the difference.
Much have changed in order entry over the last year. I was probably one of the biggest ISLD fans, and I still think it is great. However, I use ARCA on about 85% of my trades now. Why? 1. Access to all ECN's and MM 2. Reserve Orders 3. Discretionary Orders 4. Stops 5. Change orders for one commission charge (saves a fortune to size traders!) The fastest order routing and price improvement on RealTick is ARCA NOW orders. ARCA Now orders will be matched with the ARCA book or immediately routed for execution to Island, REDIBook, and Instinet at their quoted price. If needed, Now orders will use ARCA's SmartBook preferencing algorithm to oversize participants who have reserve capabilities. Any residual volume will automatically be canceled if not executed at the quoted price or better. Now orders will completely bypass Nasdaq's SelectNet system, resulting in faster fills. Example, if you have 1000 shares of ABCD and you want to sell ... Bids are as follow: REDI 20.51 X 3 INCA 20.48 X 4 ISLD 20.46 X3 If you enter a sell limit ARCA NOW order at 20.46, you will fill your entire order and get price improvement from REDI and INCA. IF you enter sell limit 20.46 on ISLD you will get 300 at 20.46 on ISLD and if no one hits REDI, REDI will cross you (sometime) at 20.46. Anyhow, you can see where I'm going with this. In the SuperSoes world and on RealTick ARCA rules
Magna.. when i was with cyber i had very good success after supersoes implementation using redi.. for one its cheaper than arca.. .002 i think.. selectnet was slow because it was a negotiation system.. a market maker had to respond to your order and that took time.. but when you selectnet an ecn for shares that are in its book, it doesnt need human intervention, it just fills the order.. try selectnetting isld sometime and you will see what i mean.. its really quite fast.. but if you have been using isld or cyber_ecn to execute i think you will be pleased with the better and cheaper fills that you can get in most cases by just using redi.. -qwik