Jon said "What really happens to our NYSE orders? They are NOT being booked with the specialist."
Jon,
If you think Datek is going to use NYSE specialist to book your order, you need to educate yourself on fees NYSE charges to execute orders. I don't remember the exact cost but NYSE charges brokerages a fee for your orders. Limit orders cost more than market orders. Either way, there is no way Datek or any other discount brokerages can use NYSE to execute your limit orders and still make money.
There are only 2 possible scenarios:
1) Datek uses Third Market (market maker) to make money on the spreads, just like a NASDAQ stock. If this is the case, then Datek gets "payment for order flow." Third Market market makers are also notorious for front running your orders.
For example, stock XYZ is bid 40 5/8 (size 500 shares). You put in an order to sell 500 shares at 40 1/2, figuring you'll accept the 1/8 slippage. Guess what, your friendly discount broker serves up your order to a MM, and he sell 500 shares available on NYSE at 40 5/8, driving the bid to 40 1/2, then he buys your 500 shares at the current bid of 40 1/2. He just made 1/8 off of your order without taking a risk. But how are you going to prove it. You can't.
2) Datek could be using the DOT system for NYSE (similar to SOES for NASDAQ). If so, then the DOT system may not book limit orders. I am not sure about this. Anyhow, I would doubt that Datek is using DOT. It's used by professionals and it cost money. At $10 per trade, don't bet on it.
I know people are going to ask me which brokers do use the NYSE and AMEX for listed stocks. No discount broker that I know of uses primary exchanges (NYSE and AMEX) except Regal Securities (they charge for it). Schwab uses regional exchanges, which is a little better than third mkt.
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