Steve:
... if you could call up, speak to a trader who could setup on our end the Soes or Snet or ECN or other proprietary system, who would hang on the phone with you while you were watching the stock develop, willing to hang no matter how long it took, who would then execute the order immediately at your direction, and have the ability to give a report instantly, to tell you you missed it or give you partial fills, etc., are you saying that wouldn't be more suitable?
I fully agree with you on the benefits of having an experienced trader routing your order for you. However, I would take your argument one step further. What if you were able to take all of the knowledge and experience from your best seasoned trader and program it into a computer. Once implemented, you would have the best of both worlds, the knowledge and trading savvy of an experienced trader, coupled with the speed and precision of a fast computer.
I have implemented this type of routing system for my trading on an expert system and am thrilled with it. For example, suppose you are willing to buy 1000 shares of ABCD at the ask price of 24 1/2, but the only offer at the ask is for 100 shares and is quoted by INCA. You might program your routing system to instantly post a bid on ISLD at the bid price of 24 3/8 and await a possible fill.
Suppose ten seconds later, a new ISLD offer is posted for 1500 shares at the offer price of 24 1/2. Since your are willing to pay this price, your computer routing system would immediately, in order:
1) Cancel your pending bid on ISLD,
2) Receive confirmation of the cancellation,
3) Place a Fill-or-Kill order to buy 1000 shares at 24 1/2 and,
4) Receive confirmation of the filled order for 1000 shares at 24 1/2
Amazingly, this entire process only takes 3 seconds! I have seen it often enough to be impressed with the ability of this type of computerized order routing. Personally, I could never hope to do that manually in less than 10-15 seconds. And, at that point, the trade would likely be gone.
This is just one example of what is possible with computerized order routing. Every imaginable scenario could be added into the routing system, along with the 'best' possible routing strategy for each situation. Also, the order monitoring would also be automated to cancel and adjust the order routing as the situation changes. To a small degree, this is what the ARCA system attempts to accomplish.
Certainly, to get the best order execution you need BOTH speed and knowledge/experience. I think the best solution is to start with the speed of a computer and add the knowledge of a seasoned trader. Otherwise, you are left with the knowledge of a seasoned trader, without any means to speed up: 1) Dialing the phone, 2) Relaying the desired trade information, 3) Evaluating the stock by the trader, 4) Typing / placing the desired order, and 5) Monitoring the order and cancelling, replacing orders manually as needed.
Steve, I am convinced that if you and I sat down for a few hours, we could develop the smartest, fastest, most effective and money saving order routing system ever! Consider it an open invitation.
Good Luck,
-Eric
ericpatterson@erols.com |
