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"....Well, although the market makers don't get paid to execute daytraders orders daytraders are too smart, with Level II and all), market makers are paid to execute orders from the customers of discount brokers. It's called 'payment for order flow' and we're all probably familiar with it. Market making firms can afford to pay discount brokers for the priviledge of executing their orders since these orders are typically 'dumb' orders which are profitable for the firm. As a result, market makers have auto-execution systems which will quickly fill all orders from these discount brokers. As a whole, this is very profitable for them. Some daytraders have learned that, by placing market orders with their discount broker, they are able to get much better fills than they otherwise were able to get. In other words, the market maker will be much more likely to execute your order if it is coming from a discount broker (typically 'dumb' orders) versus coming from the SOES or SNET system (typically much 'smarter' orders).
Anyway, this is the logic I attribute behind successful daytraders using discount brokers. As always, the key to success is just getting your orders filled."
Eric,
I agree totally with your analysis of routing orders. I usually get just as good results from orders I place with Fidelity as my orders through CyBerTrader. Often I get filled much faster with Fidelity. And, unlike with CyBerTrader, my Fidelity never goes down, never gives me trouble. Lot to be said for that.
Bill |
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