I signed up with a DAT broker; I'm wondering if I should use their smart routing or simply route to Isld each time. (first my trading style: intraday swing trade for about 20-30 cent profit target (or 2-3%) before commission, hard stop about 5 cents (or .5%) ; trade only the most liquid NASDAQ stocks like NXTL); entry on limit orders based on NBBO, effectively to enter at market but avoid unexpected horrible fill during a fast move. I'm usually stopped out within 5 minutes or hold profitable position for about 1 hour.) In my trading style, whether I can beat 1 penny on entry or exit does not make or break me; entry/exit at 9.52 or 9.53 are both acceptable; I just try to fill my order if there's a right trade. Should someone like me 1) route to Isld only and look for next trade if no fill; 2)use Smart routing enabled for most ECN's, SOES, SelectNet, etc. or 3) use Smart routing restricted to ISLD, SOES only? I will not sign up for their L2 package. I traded with L1 quotes until now and it's OK enough for me. I'll pay for their Real Time Time/Sales and intraday charting, though.
Smart routing is supposed to find the best possible price at the time of order, so that would be logically be the best method. Now, some people may claim occasional worse fills.. but I've never done any comparisons to worry about it. IB smart order fills take like 2 seconds and slippage is very minimal for me, so I can't complain.
I would say if a penny here or there doen't effect your style use the smart order routing. You may want to say want company you're doing your smart routing with, because believe me they are definitely not all programmed equally with the same logic.
Thanx nyc-hotshot, I signed up with myTrack (I might sign up with another broker in near future) about a week ago, I just got my funds credited. Anyway, I believe they have "i-routing" and I can enable ECN's, SOES, etc. (in which case the i-routing would only look at the enabled ECN's and preferencing routes.) But a few questions linger .. 1) even if the i-routing should get the best price, what if the net cost to me after the ECN fees, rebates, whatever else, is more than if I sent it only to the cheapest ECN's? myTrack told me that the i-routing only compares the prices, not the net total cost for the fill. (If I route to Redi, which in turn routes to Brut, I'll be charted for both Redi and Brut fees.) I might enable only ISLD, INCA and SOES. I believe they are the cheapest routes. Am I correct? (I usually trade about 800 shares.) 2)Right now I have a dial-up, I'm getting DSL soon. But when I asked the myTrack tech people, they said that, because they are software based, and they have their own server, once I'm connected, there's no difference in speed between the dial up or DSL as far as trading goes. I asked if the dial-up can handle all the r/t charts, r/t T/S, etc. and they said there'll be no problem. Is this true? (I just got a PC with 384MB RAM) Even if a dial-up entry/exit take as much as 2 seconds more than with a DSL, I should be OK. (for God's sake I used to flip webpages with a very slow PC which took up to 2 minutes to get my execution done.) Is this more of an issue of reliability than speed?
Damn! I talk to another person at mT; he tells me I can't set preferences on their i-Routing, that it will look at all ECN's and preferencing methods. One reason I ask some of these basic questions on ET is that when I call the broker, if I ask N different people, I get N different answers. Well, that answers my question; I'll route to ISLD only, because I get rebate for adding liquidity, which will net out to the lowest cost for me most of the times.
when time is of the essence, then direct to the ECN Book is the only way to go! smart order routing sounds good, packages well and words roll off the salesmen's tongue, however, when your money is at stake, then all that trash talk means nOthING! when time is not of the essence, then you can add those "logic delays" to your order process, however, it still then, is not a good thing. no one has published a follow up review of these SMO's. Perhaps if a study were done to compare it and execution methods to direct preferencing, then we would have hard evidence trade with sever caution, when using those bottle-neck ECN's (Redi, MAxT, ARCA, etc...)