Understanding "Not Held" Orders

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How does a ‘Not Held” order get designated as such?

Example: Robinhood routes all order flow through Apex. Apex routes to Citadel, among other destinations. In NYSE stocks, for example, Apex routes 64% of its Market orders and 44% of its Limit orders to Citadel.

Citadel reports that it routes away some of that order flow, but the report also states that none of its routed order flow is classified as “Market” or “Limit.”

100% of Citadel routed orders are classified as “Other,” which I understand may include “Not Held” orders.

How would a Robinhood "Market" or "Limit" order become re-classified as “Other” on the way to Citadel?


Robinhood / Apex 606 report: https://brokerage-static.s3.amazonaws.com/assets/robinhood/legal/RHF PFO Disclosure.pdf


Citadel 606 report: https://www.citadelsecurities.com/_files/uploads/sites/2/2013/08/CCMX_606_2015Q2_Report.pdf
 
A not held order is in order when the broker is given the responsibility for choosing when the order is executed and the price it is executed at. The orders you're talking about are not not held orders. They are orders directed to a dark pool of some kind. Those orders must be executed with either a market order or a limit order but they must follow exactly the instructions that are given and our held to those limits.
 
I am still curious to know what happens to Robinhood / Apex "Market" or "Limit" orders once they are sold to Citadel.

Wouldn't Citadel have to execute or route those orders as "Market" or "Limit?" If yes, then why does Citadel show 100% "Other" on their 606?

It's the same case with KCG, another purchaser of Robinhood / Apex order flow. KCG shows 100% "Other," and describes the "Other" orders as:

“Other Orders” include market opening and closing orders, orders submitted with stop prices, all or-none orders and Not Held orders. Algorithmic and Smart Order Routing orders are considered Not Held.

KCG 606: https://www.kcg.com/uploads/documents/Rule_606_Q2_2015_(DTTX_and_GFLO).pdf
 
I can't speak for Robinhood. I am familiar with the Apex "managed" route since we offer it to Apex Clearing client's too. These equity and options orders give a first look to the Market makers in the dark pool. After that, I have no idea where the equity orders go, but I can see the option orders end up on an exchange that is economic for them. I don't know if the equity orders are represented on an ECN or if they stay in the dark pool until executed. My best guess is that like the option orders, they are routed to the exchange that is the most economical for the dark pool operator if they can't be execute at the time of entry.

The advantage of using these types of routes is that you can avoid most ECN and option exchange fees.We offer both Managed/Smart routes and DMA. Some clients use both.
 
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