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Strategies & Market Trends : Trading For A Living -- Ignore unavailable to you. Want to Upgrade?

To: Colin Cody who wrote (520)	6/25/1998 12:27:00 AM
From: Len	Read Replies (1) \| Respond to of 1729

Len, My point exactly. Mr. DUH, with his attitude deserves what he gets. Should get out of the Market until he gains a lot more experience and loses a know-it-all attitude - at least until he knows HALF if it (g) You have to get to know him...he's really a good guy..... BUT I disagree [if I understood what you said] about ORDER FLOW. To get order flow, by definition, the brokerage needs to be acting as your AGENT, not as a PRINCIPLE on your behalf. So if Datek trades as a Market Maker on a lot of NASDAQ and OTC stocks, fine, but there's no order flow payment there. Or is that what you were saying? (g) You've got it correct, as usual. The point I was trying to make was that as a MM, they have the opportunity to trade ahead of you, by buying at the bid and selling to you at the ask, and vice versa. As you know, this is how the majority of brokers make their money, by the retail dept. acting in agency for you, while their trading department is acting as principal. This is what Datek says they do not do, and I don't know whether they do or not, but others relate incidents that make many wonder. And of course, with limit orders, the point is moot, as you say. It's when a stock is moving quickly, and you have to bite the bullet and place a market order that it gets hairy, and that was the case I was speaking about. You see, what makes Datek so wonderful for the average investor, at least when it works the way they say it does, is that you get extremely fast executions, combined with acting as your own MM, buying at the bid and selling at the ask. They don't guarantee that, but in most cases, it is possible, since they promise to give your order immediate exposure, and that's where Island comes in. You normally can't have all of these benefits with other brokers. In fact, unless you're trading with one of the order entry firms like MB Trading, CyberCorp, Castle, etc, you are pretty much at the mercy of the order flow we're talking about. And that means worse prices with market orders. So there are tradeoffs involved wherever you go. Now, maybe you can help me out. What is Island exactly, and please explain what you meant in your last message about Island. and that's why some question why trades are still showing up this way. Island was supposed to get their broker/dealer number in October 1997, so it seems curious that this still goes on. Read my post #505 in this thread for the beginning of the explanation. Island is one of the ECN's, the electronic order books that have sprung up with all the new technology. When you look at Level 2, you will see them denoted with an asterisk next to their symbol. Island is ISLD, then there's TNTO , INCA(Instinet) and a couple of others. Basically they are a repository for limit orders to queue up, based on orders coming in from the brokers that subscribe to them. Orders coming in get matched with any orders already there on the other side,and executed. The remainder then get posted on the book, and the total of the best b/a show up on Level 2 under that ECN's symbol. Market makers don't like them, cause they take a lot of trades away from the MM's, so they have to work harder to keep making the spread. Island is in fact working with the SEC to get itself and others listed as an exchange. That is beyond this discussion though. There's a whole lot more, but it's late and I'm tired of typing. Let me know if the above post clues you in. P.S. Check out isld.com. You can hook up to watching the Island book while you are trading. I find it very helpful.