Page 286 - THE MARKET WHISPERER

282 PART 9 - The Trading Platform

Order Routing

Routing to Different Destinations

When you buy or sell a stock, you need to decide how you want to route
the orders. Routing is a topic on which entire books can be written. At this
stage, I do not suggest you delve too deeply into it, since it is particularly
interesting for those who trade in very large quantities of thousands or
tens of thousands of shares.

First, we need to understand what routing is. In Chapter 1, we learned
that when you are interested in buying or selling a stock, you need to find a
buyer or seller willing to take the role of the other party in the transaction.
One possibility is to route your orders to the market makers. We learned
that they make their profit within the spread between buy and sell prices.
We also learned that we might encounter the specialists, the NYSE version
of the NASDAQ market makers. Another routing option is direct to the ECN
(Electronic Communication Network). The ECN is a network of computers
that links buyers and sellers and in which you can set buy and sell orders
without the agency services of market makers.