Intelligent Order Routing Direct Acess
- Thread starter xtech
- Start date
Smart Routing...in its generic form...means that your order gets routed to be best price available on among all the ECN's. For exmaple, if you wanted to buy 1000 shares of ABC and it is advertised at ARCA, INCA, ISLD and REDI, ...in that order for best prices..and let's say each has 200 shares each showing. The smart routing execution system will get 200 from ARCA, then INCA, then ISLD, then REDI....and last 200 from wherever it is best available. Its' great in theory...but many systems that advertise this takes too long and often dont get the stocks. if it works...then great.
"Smart routing" is a term tossed about by brokers who do not understand how things work.
Many firms and ECNs just use a step by step order routing.
e.g. first matches in house book, then routs to ECNs with Direct Links established, then uses Nasdaq services.
This is how ARCA works since you mentioned them.
The absolute most abusinve use of the term "smart" is when all of your orders are sent to one place like ARCA, and your broker just piggy backs ARCAs "smart" software. There is nothing wrong with piggy-backing ARCA, it is effective. But, it is wrong to claim you have "smart" software.
Sometimes brokers hide their inadequate "smart-ness" by using the term "proprietary algorithm." If you hear this term you know they do not have any "smart" software at all. It likely routes to one ECN or market making firm.
There are some firms that do design in some "smart" software. But from what I hear from programmers, it is very time consuming to do a lot of market analysis before sending an order. This of course will result in slow executions. So "smart" (in my opinion) is not bad nor good, just a term thrown about by marketing people to get new accounts.
What is truly important is the ability to know where your orders are going, and what type of routing is provided. The more access and direct lines your broker has to exchanges and ECNs, the more able you will be to trade will all quoting participants.
In the end... ask yourself... who's quote do I see and can I get to it effectively?
Many firms and ECNs just use a step by step order routing.
e.g. first matches in house book, then routs to ECNs with Direct Links established, then uses Nasdaq services.
This is how ARCA works since you mentioned them.
The absolute most abusinve use of the term "smart" is when all of your orders are sent to one place like ARCA, and your broker just piggy backs ARCAs "smart" software. There is nothing wrong with piggy-backing ARCA, it is effective. But, it is wrong to claim you have "smart" software.
Sometimes brokers hide their inadequate "smart-ness" by using the term "proprietary algorithm." If you hear this term you know they do not have any "smart" software at all. It likely routes to one ECN or market making firm.
There are some firms that do design in some "smart" software. But from what I hear from programmers, it is very time consuming to do a lot of market analysis before sending an order. This of course will result in slow executions. So "smart" (in my opinion) is not bad nor good, just a term thrown about by marketing people to get new accounts.
What is truly important is the ability to know where your orders are going, and what type of routing is provided. The more access and direct lines your broker has to exchanges and ECNs, the more able you will be to trade will all quoting participants.
In the end... ask yourself... who's quote do I see and can I get to it effectively?
You may be right about the programmers I have spoken with. It is not that nothing can be checked before sending an order. It is just that the program must check margin requirement, available cash, current positions to see if offsetting or opening, etc...
Then it has to look into the market place. I am not a programmer mind you. But I have spoken with quit a few. They say if you want to make an analysis of the market - it is time consuming, even in the nanosecond world of computers.
Are there any programmers in here that have dealt with programming a "smart" router? Maybe they could enlighten us to what could be checked.
I bet the traders on Elite trader could design a "smart" router better than any in the market place. If only we had a clear picture of what tools were available, in a timely fashion.
Then it has to look into the market place. I am not a programmer mind you. But I have spoken with quit a few. They say if you want to make an analysis of the market - it is time consuming, even in the nanosecond world of computers.
Are there any programmers in here that have dealt with programming a "smart" router? Maybe they could enlighten us to what could be checked.
I bet the traders on Elite trader could design a "smart" router better than any in the market place. If only we had a clear picture of what tools were available, in a timely fashion.