rok,
The reality of trading Nasdaq stocks is that the market is fragmented, and that is a consequence of Nasdaq's failure to provide an executions system that functions with the speed and reliability of the many ECNs that have emerged. "Best Execution" is represented by IB as a price priority system, and our experience shows that to be true. Whenever there is a "tie" in price for a marketable order, BE will route your order to an ECN if any of them are at the best price, but when they are not the order is routed to an MM matching your limit price. Once in the hands of an MM, you are "stuck" until a decision is made about your order. For orders that go SelectNet preference to an MM, you (or IB on your behalf) may not cancel that order for at least 10 seconds. In these cases, you might very well not get the best possible execution because you often lose opportunities while you order is held up by the MM.
With the addition of SOES, there is now a fully automatic execution system for hitting the MM quotes, but unfortunately these quotes are often in a dormant state because of the Nasdaq rule giving 17 seconds after each execution for the MM to refresh or remove a stale quote. ECNs cannot have dormant quotes. After every execution that depletes all the stock at a price level, the corresponding quote is immediately removed.
For BE limit orders that are not marketable you are leaving it up to IB to select an ECN to post your order. We don't know the details of the proprietary BE algorithm, but as users we have seen these orders posted on a number of different ECNs, and moved around if they don't get hit within about 30 seconds. This is not always to your advantage. If you have a preference for which ECN to use, or don't like the idea of your quote moving around (I don't) you should learn to use the system's direct routing function.
Dan |
