Order Routing

Discussion in 'Order Execution' started by 3acor, Mar 24, 2019.

  1. 3acor

    3acor

    Some exchanges offer inverted maker/taker fees. The BATS-Y exchange charges $0.0030 for providing liquidity, and pays $0.0020 for removing it.

    Now consider another situation. BATS-X has 10,000 shares offered at $10, and the BATS-Y book is empty. We’re considering where to send a $10 limit sell order. If we send it to BATS-X, we’ll receive $0.0025. But we’ll only get this if our order is executed, and there will be 10,000 shares ahead of us. If we send our order to BATS-Y, we’ll pay $0.0030, but our order will be at the front of the book. We also know that BATS-Y is a more attractive place to send a market order.

    Let's say $10 is the NBO, if someone lifts the offer, shouldn't price execution follow price/time priority as in 10,000 shares would be executed first no matter which exchange it is posted at? So even though your offer is first on BATS-Y, shouldn't the buy order go first through the 10,000 as it was posted first?
     
  2. Robert Morse

    Robert Morse Sponsor

  3. 3acor

    3acor