Routing listed orders through Island; cheap or stoopid?

E

English Ed

Hey, I posted a thread recently about routing orders for the NYSE through herzog the market maker. Thanks all for the advise, it is an avenue I will not be persuing now. I am ready to open an account that will provide me with (IMHO)the cheapest Super dot exchange fee of $0.005/share. And $9.95 commissions for frequent trades (with sutton online probably, I know there are a couple of others but I like the sound of sutton) However, someone suggested routing orders through ISLAND for $1 per ticket, which, obviously would be a serious reduction in transaction costs. So is this a cheaper and acceptable alternative to direct access through superdot or is it not as simple as that, what are the differences ?
Thank you for your time. ED
 
As far as I know (anyone feel free to correct me)the differences are that your ISLD order for a listed stock will only match up with another ISLD order, unless it's preferenced through SNET or ARCA. Therefore, you are bypassing the specialist and SuperDOT system altogether. This is only a feasible scenario if you know that there is sufficient liquidity on ISLD for that particular listed stock. Otherwise, your ISLD order might just sit there and only be executed against when the stock is moving against you. In this case you need to be watching your Level II screen to see what the ISLD availability is.
 
The QQQ is one stock that has a ton of liquidity on island. In a running market, it can be almost impossible to get a quick fill from the QQQ specialist, but there are always shares, usually at every cent level, available on island.

Htrader
 
Keep in mind that by trading NYSE stocks on an ECN during regular market hours you give up all the advantages of an exchange such as price priority, time priority, and most important liquidity. If at all choose an ECN that is integrated into CQS and ITS so you will be seen and can't be traded around. The only ECN that currently fits that bill is ARCA which is linked into CQS/ITS via Nasdaq Intermarket (shown as NASD in the regional quote montage). Even then executions will tend to be inferior to NYSE executions, though, due to the lack of internal liquidity.

On ISLD you will only receive executions in the rare case that internal liquidity is available or when you can be picked off/arbitraged against.

The only issues with massive ECN liquidity are QQQ and to a somewhat lesser extent SPY. Unless you're trying to move size executing through ISLD can actually yield better results with these than going through the specialist especially in fast market conditions.
 
It depends on the stock. Today I sat with 10k crossing the market by a cent on rad on island for 5 minutes and was never hit.
So much for trying to save some loot. THe stocks I use island on are GLW, NT, EMC, QQQ, AOL Its usually better to execute when you're either wrong and want out fast, or it';s the end of the move, cause the island guys are usually trigger happy, and will give you the extra .2
 
If your primary objective is to get out fast and you don't care about potential price improvements there's also the option of using the NYSE's Direct Plus route now which results in an automatic execution against the posted bid/offer.
 
You must log in or register to reply here.
Back
Top