When to route order to an exchange that does not have NBBO?

J

jayr95241

Hi, Apologies if this has already been spoken about.

I am confused on how trades are routed on order book.

Lets say ARCA is 10.00 x 10.05, EDGX 9.90 x 10.50.
If I route an order to buy 100 shares on EDGX with a 10.50 limit than I will get filled at 10.05 because that is NBBO.
What is the purpose of routing to an exchange that does not have NBBO, is it for hidden liquidity only?
 
The NBBO protection is only for the displayed size. So if you send order for 200 shares, only 100 will be sent to ARCA(assuming offer size was 100). Also, If those 100 shares at ARCA get removed by someone else, they may not get filled at all. Order protection rule is pain in the butt for people who route orders themselves.
A friend of mine described it like this:
Imagine you want to buy a gallon of milk. Your local grocery has it for 2.99 but Walmart across town ADVERTISING it at 2.97 per gallon but only in pints and has a limit of 2 per customer WHILE supplies last!
 
When it is NBBO, you can be sure that you will receive the best possible price when executing trades through your broker without worrying about any kind of aggregating quotes. It will all be in your favor.
 
NBBO
Stock XYV
Arca ECn bid 1, Ask 2
EDGX Ecn, bid 0.99, Ask 3
NITE bid 0.00001, Ask 4000


NBBO - 1 and 2

You broker cant sell the stock for less than 1 and cant buy for more than 2. Generally ECN are also subject to NBBO
 
jayr95241 said:
Hi, Apologies if this has already been spoken about.

I am confused on how trades are routed on order book.

Lets say ARCA is 10.00 x 10.05, EDGX 9.90 x 10.50.
If I route an order to buy 100 shares on EDGX with a 10.50 limit than I will get filled at 10.05 because that is NBBO.
What is the purpose of routing to an exchange that does not have NBBO, is it for hidden liquidity only?
More...

Dark Pools still have NBBO.
 
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