Brendan, the limit orders I placed did NOT narrow the spread, they were marketable limit orders, sells placed at the bid or buys placed at the ask. On these orders I often get price improvement at Datek, to my delight, but only on listed securities, rarely on Nasdaq.
Although Datek uses a third party on these trades, the trading does take place on the NYSE floor, which seems superior to using a regional exchange, given the greater volume and generally better prices quoted there. Apparently my marketable limit orders are filled at the best immediately available price which many times happens to be better than the best quoted price, probably due to a simultaneously arriving cross order. I doubt this would happen as frequently on the Chicago Exchange, given the lower volume there.
As for limit orders that do narrow the spread, I still think you are better off on the NYSE floor, since your limit order is more likely to attract a cross order than one placed on a regional exchange. At Brown you are hoping a limit order takes the book down at NYSE so you make good on Brown's guarantee of similar execution quality, at Datek you are actively attracting a cross at NYSE with your limit order.
You said: >>The great thing about Brown is that you can wait for the spread to narrow to a 1/16th and then bang them with a $5 market order, and you don't have to mess with unreliable limit orders.<<
I agree, but unfortunately the odds of price improvement are very low in this case. I am currently getting price improvement about one out of four times when I place a marketable limit order in this situation at Datek.
Thanks for sharing your experiences. I'd like to think I'd get similar or better price improvement at Brown than I'm now getting at Datek, but considering the mechanics of the trading, it seems unlikely.
Esteban |
