Where should I route my orders?

S

sloth

I am new to direct access brokers and I am very confused with the fact that I can route my orders to different exchanges and ECNs.

So are there any links to resource to explain the differences between those stock exchanges/ECNs or someone can answer my questions?

1. For a limit order, let's say UTL, a NYSE listed stock, has bid price 20.65 and ask price 20.85. If I submit a buy order of 100 shares at 20.66 and I want it to be filled when the next market sell comes, where should I route my limit order? If I compare INET openbook and NYSE openbook for UTL, I can see that INET book has only part of the orders listed on NYSE book, so I guess I would have a better shot to route my order to NYSE?

2. On the other hand, for CODI, a Nasdaq listed stock, NYSE openbook doesn't include such stock, so does it mean Nasdaq/INET would give the best chance to fill my limit order?

3. Back to UTL example, if on NYSE book the bid-ask prices are 20.65 and 20.85, but on INET book the bid-ask prices are 20.55 and 20.95. If I route a buy order of 20.56 to INET, is there any possibility that my order will be filled when a market order is routed to INET (assuming market doesn't move by then)?

4. Does INET equal to Nasdaq? I can't find a definitely answer.

5. Some articles says "limited order are normally routed to ECNs", why is that and what's the pros and cons to route it to exchanges vs ECNs?

Sorry for so many questions and thanks for your help in advance!

sloth
 
Suppose there are three bids placed at the best price of 80.65
ARCA 80.65
NYS 80.65
INET 80.65
----- 80.63
----- 80.63
----- 80.62
More...
now a sell order(80.65) routed thru arca arrives... then the arca bid will get filled. If a sell order thru inet arrives then the inet guy gets the fill. Hence by watching the tape of a stock (wether most incoming orders are thru NYS or ARCA or INET) you should guess which ecn to route thru.
if on NYSE book the bid-ask prices are 20.65 and 20.85, but on INET book the bid-ask prices are 20.55 and 20.95. If I route a buy order of 20.56 to INET, is there any possibility that my order will be filled when a market order is routed to INET (assuming market doesn't move by then)?
More...
there are rare chances, and most s/w will show such fills as block prints.

NSDQ/ISLD/INET are the same.
 
Thanks a lot for the response. I just read this one:
Investing Online for Dummies
By Matt Krantz, Kathleen Sindell

According to this book, people used to trade against the market makers through exchanges. For example, if on NYSE UTL has bid-ask as 20.65-20.85, those would be market maker's prices. And if I put a limit buy order of 20.66 and a market sell order comes in it will not hit my order but will hit MM's bid price at 20.65.

And then ECNs appear and let people trade directly against each other. So if INET has the same bid-ask and I put in the same buy order at 20.66 it will be filled when a market sell comes in.

The author pointed out that's why most brokers let you choose where to route your limit order to either Arca or INET but not NYSE. And that seems to be true according to what TDAmeritrade does.

I am asking this because, for a lot of NYSE stocks, it seems most of the orders are filled at NYSE rather than Arca or Inet, which make me feel I should route my order to NYSE, but if my order will only trade against MM's, I will always have to pay the spread which is not good.

Thanks again!
 
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if on NYSE book the bid-ask prices are 20.65 and 20.85, but on INET book the bid-ask prices are 20.55 and 20.95. If I route a buy order of 20.56 to INET, is there any possibility that my order will be filled when a market order is routed to INET (assuming market doesn't move by then)?


there are rare chances, and most s/w will show such fills as block prints.
*****************

So why would such situation happen? Is it because a block sell order comes to NYSE and exhausted the buy orders and therefore the rest portion is routed to INET?

Or just because some order was incorrectly routed to an ECN where the market is worse?
 
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Hence by watching the tape of a stock
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Where can find the tape of a stock? I can't seem to find out the exchange/ECN info from the L1/tick data.
 
I can find the time and the sale in L1/tick data, but I need to find which exchange/ECN the sale comes from in order to know which one executes most of the volume.

Thanks. sloth
 
Quote from sloth:
I can find the time and the sale in L1/tick data, but I need to find which exchange/ECN the sale comes from in order to know which one executes most of the volume.

Thanks. sloth
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Which exchange has the most volume doesn’t really matter. Neither does which exchange the stock is listed on. There are no more MM’s or playing with the markets anymore. If you’re the first in line, you’re gonna get filled first, assuming you’re trading a somewhat liquid stock, 10 million+. If arca has a bid at 65.20 and nsdq 65.21, and the lowest ask is 65.25, you can place a buy at 65.22 on any ecn and you’re going to be the first to get filled on a market sell order. Nobody’s going to sell at 21 when you’re willing to buy at 22. There are algorithms running that will take your order out if there is the slightest advantage to them. I usually route to bats, and have gotten pretty good fills. It’s really just a matter of preference and ecn fees. Worst case scenario, you will be filled the milli second that the market trades through your price.
 
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