Does it matter which exchange my order is routed to in most cases? Do you just choose the one with the biggest volume? Using smart routing, my order is routed to the exchange with the best price currently, correct? This only seems like it would matter if I am using a market order (I use limit orders). Also, when I see quotes on the trading tools, are these usually the "best price" that is offered from the choice of different exchanges, or are the quotes usually provided by a certain exchange?
The broker you're using probably uses a smart router that will route to the best price automatically. The exchange you route to doesn't matter unless you're taking in some type of index or exchange arbitrage that makes you get out of trades in less than a few seconds. I'd just route to the broker's smart router or to one of the more liquid ECNs, Island or ARCA.
I'd been noticing the smart router (I use IB) usually ends up routing to the NYSE for stocks that trade on the NYSE. I'm more familiar with ISLAND, so sometimes I was modifying it to go there instead. It was just familiarity on my part, guess I'll just let it do its thing from now on. Thanks for the answer.
Do you have the Bundled or Unbundled commissions with IB? The routing fee for Island is .003/share while the routing fee for the NYSE is .0008/share. So it is cheaper to route to the NYSE in order to remove liquidity than it is to route to Island. However Island will usually have a better price than the NYSE. If you have Bundled commissions then maybe IB's smart router is routing to NYSE because it is a cheaper fee for them to pay, but they might be doing it at the expense of you getting a worse price from the NYSE than from Island. (Also it is no longer called Island, the ECN is now called NSDQ because Nasdaq bought Island a while back.)
I have bundled, but I should probably switch to unbundled, just looking at it it appears it would be cheaper for almost all of the trades I've done. So, for add liquidity or remove liquidity, does this just correspond to whether the trade is immediately filled or not? So, if I place a sell order above the current bid and it sits there for a few seconds, it would be counting as adding liquidity, and I'd get a rebate on some exchanges for that?
If you add liquidity on NSDQ(Island) it is a rebate of .002/share and if you add liquidity on NYSE there is no fee or rebate. However if you add liquidity on the ECN EDGX it is a rebate of .0027/share.