DAYTRADING Fundamentals Message Board

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Strategies & Market Trends : DAYTRADING Fundamentals

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To: Wayners who wrote (9127)	6/23/2000 9:45:00 PM
From: dli	Read Replies (3) of 18137

Lack of order visibility to the broader market is the main the problem with the current state of ECN trading in listed stocks during market hours. My understanding is that this is due to the fact they're not integrated into ITS. About a week ago NASDAQ announced a new initiative to integrate ECNs into ITS through NASDAQ Intermarket, which is what stands behind NASD in the ITS (see LPS5's post). However, those ECNs which already trade listed stocks (i.e. ISLD, REDI, and ARCA) are not part of that initiative. IMO until those fragmentation problems are resolved it is in your best interest to refrain from posting limit orders on any of those ECNs as from my experience with ISLD execution quality is very poor. The fact that my now former broker started sending order for ISLD traded listed stocks to ISLD instead of SuperDOT actually made me change brokers due to the enormous deterioration in the quality of fills. It seems like ISLD does not make any information available concerning how they interface with ITS, so the following is based on my observation of the interaction between ITS and the ISLD book. When an order is put on the ISLD book unless there's an internal match (which is something that may not be in your best interest as it takes away any chance of a price improvement) the order will only be picked off the book once it matches the inside market on ITS. E.g. if the inside market for LSI is 43 1/4 by 43 3/4 and a limit order to sell at 43 5/8 is placed on ISLD, that order will sit there until either there's an internal match or the inside bid changes to 43 5/8. Of course, while that order is sitting there there tend to be many other orders being executed at and above that limit price. So basically ISLD does away with time and price priority (and you thought that as an advantage of trading listed vs. OTC) and forces people to buy the ask and sell the bid. No more offering out or cutting the spread unless you happen to receive a price improvement which from my experience, though, are much more infrequent than with orders submitted through SuperDOT. Until these deficiencies are addressed, the only real use for those ECNs that I can see is to use them to pick up shares at better prices from orders not visible to the broader market. With order routing software that does the scanning for you this is often rewarding. Dave

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