whats the best ecn ? rebates vs connectivity

G

giggollo

Whats the best ECN in terms of rebates vs connectivity, assuming youre always adding liquidity? For example, ATTN pays the highest rebate (0.003/share) of all ECNs, but from what i understood it is not as "connected" to other ECNs as ARCA or BRUT, which pay a lower rebate. That means if you place your limit order on ATTN you have a lower chance of getting filled because of the lack of connectivity but you collect a higher rebate of 0.003/ share as opposed to BRUT (0.0022/share) or ARCA (0.002/share). TRAC pays a rebate of (0.0027/share) but i dont know how "connected" it is to other market centers.

Can anyone with some knowledge of ECN's tell us how they pick which ECN to place their limit orders on and how they balance collecting higher rebates vs the lower chance of getting filled on those higher-paying ECN's ?

Thanks in advance
 
Personally, I find that overall I'm most profitable using BRUT to add liquidity. You will rarely, if ever, get filled on ATTN unless the bid/offer is about to change, because it is the most expensive for traders to retail into.

Depending on the stock, you can get filled on TRAC, but you usually have to be quick to be near the front of the line with your order. I usually stay away from it though, because it's frustrating when the liquidity on it is very low (which it usually is).

ARCA is usually only useful nearing the end of the trading day (after 3pm). Usually it's not as liquid as BRUT during the midday period (10:30am - 3:00pm), and it doesn't pay as much to add liquidity as you mentioned.

BTRD is pointless, you will rarely if ever get filled (especially now that it's more expensive to retail into for traders).

Out of all the ECNs, I would say that Island is the most liquid, but I have mainly traded stocks that allowed shaving. Now that the sub-penny trading will be eliminated on all stocks over $1, we may see a change. Personally I believe that ISLD will be the most liquid once this happens, but I'm still holding my breath until the first week or two of the new year has come and gone to see how the liquidity changes on all ECNs.

Pete
 
Good points Pete...another point which i wanted to make is connectivity: Another advantage of BRUT is that it will route your passive limit order out if it is crossed by a displayed quote from another market.

(see Directed Cross Orders:
http://www.nasdaqtrader.com/trader/hottopics/brutrefguide.pdf)

To my knowledge, ATTN will do no such thing (I dont know about TRAC or other ECN's??). The fact that BRUT will do this, i imagine, means you will get filled in case of another order locking or crossing your resting limit order on BRUT, but if you're using ATTN, for example, it will lock or cross but you won't necessarily get filled at all...In fact with ATTN, price may even trade below your limit order, and u still dont get filled.

When the trade-thru rules (Reg NMS) are implemented in April 2006, they will affect the outcome of these scenarios to prevent price trade-thru's.

Someone with more knowledge please shed some light on this and also on what happens with the other ECN's we didnt mention if i place a resting limit order on them and await someone to execute against my order.
 
Quote from giggollo:
Another advantage of BRUT is that it will route your passive limit order out if it is crossed by a displayed quote from another market.

I believe ARCA proactive orders will do the same. I've had orders resting on ARCA for Naz stocks that get taken, and it shows (and gets charged) as an ARCX, which is the same thing that it shows if I use ARCA to take another venue.
 
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