ISLD Nuances
The ISLD ECN is the #1 most popular and liquid ECN.
ISLD Advantages:
1) Highest liquidity, excellent place to post a limit order, since higher liquidity = greater chance of being filled against a matching order
2) Extremely fast. I measure and record the fill time of all of my ECN fills. ISLD executions typically average 0.30 to 0.60 seconds from order entry. Now that's fast! I do not have direct access to other ECN's and therefore must route through SelectNet. For comparison, the other ECN's are much slower: INCA (7 sec), ARCA/ BRUT/ NTRD (about 4.5 sec), ATTN/ BTRD/ REDI (about 4 sec). Granted, much of this delay is due to going through SelectNet. Certainly, it can be said that INCA is clearly the slowest and that direct ISLD access is very fast.
3) Inexpensive. Most brokers have direct access to ISLD, and therefore do not charge customers for using this ECN. Those that do charge their customers will typically only pass along the ~$1/ticket fee that ISLD charges them. By comparison, when routing orders through SelectNet to other ECN's, the typical charge is $0.05 to $0.15 per share to execute orders on their ECN. This is a hefty fee of $5-15 per 1000 share order. Their will likely be little or no charge to route orders to ECNs to whom your broker has direct access.
ISLD Disadvantages:
1) The dreaded partial fill! Nothing worse than placing a 1000 share limit order and being filled for only 7 shares. To my knowledge, ISLD is the only ECN that accepts orders that are not in increments of 100 shares. Certainly this is the biggest downside of using the ISLD system.
ISLD Miscellaneous
1) Although the Nasdaq Level II display only shows the best bid or ask price, many brokers provide their customers with a complete view of the ISLD book. In other words, you can see the prices/sizes on every order on the ISLD book for any stock. This can be useful to see where the support/resistance is in a stock. In addition, you can access the ISLD book directly over the internet from
isld.com
2) Island orders come in three flavors: Normal, Subscriber-Only and Hidden. Normal ISLD orders represent 95+(?) percent of all ISLD orders. They are placed on the ISLD book and are also shown on the Nasdaq book, assuming they are at the best bid/ask price for all order in the stock.
Subscriber-Only orders can be placed on the ISLD book, but are never sent to Nasdaq for display. One reason for using this option would be to enable a trader to lock or cross the market in the stock (see post #1 for info on locking/crossing). If a locking/crossing ISLD order were to be posted on Nasdaq Level II, it would violate Nasdaq rules. Therefore, ISLD does not allow these orders to be sent to Nasdaq and it will reject any "Normal" ISLD orders which would result in a Lock/Cross situation. However, Subscriber-Only orders can Lock ro Cross the market, since they can only be seen by someone looking at the ISLD book.
Finally, Hidden ISLD order are not shown on Nasdaq or the ISLD book, but they are available to fill against any subsequent matching orders that come into the ISLD system. I assume hidden orders may be used by institutions looking to tap into the ISLD liquidity without 'showing their hand', as to their size. As I said, the vast majority of ISLD orders are of the normal variety, although I know that CyberTrader now offers the ability to post Subscriber-Only orders. If you don't know what kind of ISLD order you are sending, it is almost certainly a "Normal" order. |
