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.Atthe moment, the next best bid stands at 74 13/16.You see bids for 1000 shareseach by a FleetBoston Robertson Stephens (RSSF) market maker, and Instinet(INCA), an ECN owned by Reuters, and for 1,600 shares on The Island (isld), anECN owned by Datek Holdings.You choose to route your order to The Island, the market participant bidding forthe largest number of shares largest inventory.In other words, you're willing tosell at 1/16 of a point below the best bid to ensure you get out of your position,rather than hoping more inventory will move up to the inside bid and running therisk of the market moving further against you.So you are willing take theadditional loss of $31.25 (1/16 X 500 shares) as insurance of getting a good fill.To do this, you just click your mouse on the area of the Level II screen displayingThe Island bid at 74 13/16 and pick your route by selecting The Island from thedrop-down menu in among execution options toward the top of the demo.Yourorder pops up in the white order entry boxes: ORCL 500 74 13/16 ISLD.Youmentally verify that you correctly entered your order, then click the Sell button tothe right.By choosing The Island in this case, you've actually done two things to improveyour odds of a good fill.The Island has the most liquidity.Second, because TheIsland is an ECN, it will automatically fill your order if there is available inventory.In contrast, market makers usually post only a limited portion of their inventory,allowing them to change their price as orders are filled.Let's say you preferencean order to a market maker via Nasdaq's SelectNet order execution system.Themarket maker is under no obligation to take the other side of your trade.Meanwhile, you must wait at least 10 seconds before canceling your order.The market maker is required to match your order if the order is sent viaNasdaq's Small Order Execution System, and you can cancel SOES ordersimmediately.But SOES orders are subject to tier limits putting upper limits onthe amount of shares you can buy or sell in a stock within a five-minute period.So let's say you use SOES to buy 1,000 shares of a stock with a tier limit of1,000 shares.You cannot buy additional shares for five minutes.(You can,however, sell all or part of your position.)There is still no guarantee that your order will be filled at 74 13/16.A largeenough order could hit The Island bid at 74 13/16 ahead of your order, removingthat liquidity from the market.In that event, your order will go completely orpartially unfilled, depending on how much inventory remained and whether youinstructed your order as all-or-none or allowed a partial fill.With direct access and Level II screens, you also can try to sell at the ask or buyat the bid.In effect, you are adding liquidity to the market.Of course, you nowdepend on someone seeing your bid or offer and choosing to transact at thatprice.If you bid or offer at the inside quote, your order will appear to anyone withLevel I or Level II looking at the same stock at that point in time.If you improveupon the best bid or ask, your order will improve the inside quote and againappearing on both Level I and II displays.If you bid lower than the inside bid, orhigher than the inside ask, you'll appear only on Level II displays.Direct-access providers have automated many of these choices.CyBerCorp, forexample, has developed a proprietary routing capability called CyBerExchange.This technology is particularly useful when you are removing liquidity from themarket.In other words, you are seeking to buy at the ask or sell at the bid, muchas you would using a conventional online account.In this case, direct accessvastly raises the odds of getting a prompt fill, especially when you're dealing inlarge order sizes.By choosing CyBerExchange routing, rather than selecting a specific ECN ormarket maker, CyBerExchange scans all the market participants dealing in yourstock, then routes the order to the participants offering the best available price.Let's say you enter a CyBerExchange order to buy 500 shares of stock XYZ.CyBerExchange finds that 300 shares offered at the inside ask of 52 1/8, another400 shares offered at 52 3/16.The technology will try to fill as much of yourshares as possible at the inside ask before moving on to the next highest pricelevel.In some cases, the technology will split up your order among multiplemarket participants.However, your order will be treated as a single order,incurring one base commission (not including ECN or exchange fees, whereapplicable).CyBerCorp's direct-access software also enables you to put in stop-lossparameters, including trailing stop-loss orders or alerts, on the CyBerCorpservers.As a result, your order remains invisible to the market unless triggered.This eliminates the risk of market makers running the market down to pick offyour stops.Copyright © 2001 by TradingMarkets.com, Inc [ Pobierz caÅ‚ość w formacie PDF ]