Limit orders for RSP vs DMA, are they any different?

M

mickael28

Hello,

I read about quote-driven and order-driven orders and the difference between RSP providers and DMA, however, I was wondering, is there any difference between a LIMIT ORDER in a quote-driven and orden-driven orders (other than the fact that the limit order might be kept private with the broker until it gets filled)?

I was thinking that if it's a limit order, it shouldn't matter how it gets filled, is that correct?

Thank you,
Mickael
 
Quote from mickael28:

Hello,

I read about quote-driven and order-driven orders and the difference between RSP providers and DMA, however, I was wondering, is there any difference between a LIMIT ORDER in a quote-driven and orden-driven orders (other than the fact that the limit order might be kept private with the broker until it gets filled)?

I was thinking that if it's a limit order, it shouldn't matter how it gets filled, is that correct?

Thank you,
Mickael
More...

RSP providers? What is RSP?
 
Quote from 1245:

RSP providers? What is RSP?
More...

Sorry, maybe it is the terminology the used in the UK. This is what I read:

Contrary to popular belief, most UK Equity trades executed for retail share dealers do not go anywhere near the London Stock Exchange's systems. Instead they go to RSPs (Retail Service Providers). RSPs are typically Investment Banks or Brokerage Houses that provide electronic quotes to you via your online broker.

These quotes are typically small in terms of the number of shares that may be traded, and are valid for a few seconds. This process defines a Quote-Driven market.
More...

It seems those brokers offer you a price that you can accept or reject for around 10seconds when you try to put a trade, but I was thinking that if you instruct them with a limit order where you want a specific price then it shouldn't be any difference with the way a DMA broker apperates?
 
In the US, there are many different ways for your equity order to get executed. Let's just look at two types.

DMA: With DMA orders your order 'should' go directly to the exchange you choose directly. If it's a limit order of market order..it makes no difference.

managed-smart routes: Your order goes first to a dark pool of some kind, then either stays in the dark pool or gets re-routed to an exchange or ECN. Either way it should not matter if the order is a market order or limit. This order might take long, get better or worse execution. Many professionals don't like going though a dark pool because they believe they can get "gamed." Many believe they not only get better executions that way but can also avoid ECN and exchange fees. Unless you are playing big size, I would use DMA if offered to save money by adding liquidity.

I hope this helps. I'm not sure if I answered your question.

1245
 
Quote from 1245:

Many professionals don't like going though a dark pool because they believe they can get "gamed." Many believe they not only get better executions that way
More...

Thanks 1245,

This part is what I didn't fully understand, which is what seemed to be implied in other articles around the subject I found online, but let's put an example:

You want to enter long a specific stock at $10.50, so you put a limit order at that level. If it reaches that point with either DMA or managed smart-routes it shouldn't matter, should it?

or what do they mean by 'can get gamed'? that even if the price reaches your limit order if you are going with a managed smart-route maybe it doesn't get trigerred when it should?
 
Quote from mickael28:

Thanks 1245,

This part is what I didn't fully understand, which is what seemed to be implied in other articles around the subject I found online, but let's put an example:

You want to enter long a specific stock at $10.50, so you put a limit order at that level. If it reaches that point with either DMA or managed smart-routes it shouldn't matter, should it?

or what do they mean by 'can get gamed'? that even if the price reaches your limit order if you are going with a managed smart-route maybe it doesn't get trigerred when it should?
More...

---Not in most cases for small orders although you would have a better chance of buying on the bid with DMA. If the stock becomes offered at 10.50 on any exchanges or ECNs you should get a fill. Remember with dark pools your order is not represented on any exchange or ECN but they still have a best execution responsibility.

---There are people that claim that large orders in the system are forced to pay up. So a HF Trading shop might see that order and buy stock in front of you. Making you pay up. For small orders I don't see this as an issue.

The reality is simple to me. Unless you are a HF trader or a scalper in the market, place your limit orders where you want to enter and exit the stocks you trade or invest in and don't worry so much about this. It will likely never be an issue. I like DMA because I feel there are times I can buy on the bid and sell on the offer without the current stock price crossing my limit.

1245
 
I saw that in UK most of the standard brokers don't offer DMA, so I was wondering if that could be a problem for a small retail investor, but as you said, I think if you're not scalping it shouldn't make any real difference...

On the other hand, the few brokers that offer DMA sell it as a feature that could greatly improve your performance. I think here they're just talking about entering at the market price rather than via limit orders.

But I think I have a better idea now,

thanks!!
 
You must log in or register to reply here.
Back
Top