Page 287 - THE MARKET WHISPERER

THE MARKET WHISPERER 28 3

As stock traders, in contrast to investors, you need to use a Direct
Market Access (DMA) trading platform. This allows you to route your
orders to whomever you choose: direct to market makers, or to the ECNs.
The advantage in market makers is that they do not take commissions for
executing the order, but they will be a little slower. By contrast, the ECN
options are much faster, but if you remove liquidity (to be explained later),
they will take a commission which is currently $3 for every 1000 shares.

Automated Routing

If you trade in small quantities and find it difficult initially to understand
how to use the routing options, ask your broker if he or she can provide
you with automated routing. The broker, through the automated routing
program, knows how to choose the cheapest, fastest destinations with the
highest liquidity, which are really the best options when dealing in small
transactions.

Manual Routing

If nonetheless you want to route direct, for example to an ECN called ARCA,
you will need to choose the ARCAL order when setting the limit, or the
ARCAM order for an order directed at the market. When I want to execute
a stop order, I can choose ARCAS. In other words, the last letter indicates
the type of order: limit, market, or stop. If, for example, you want to route a
limit order to market makers, you can use SBSHL (Salomon Smith Barney),
or NITEL, or a range of other routes to various market makers, according
to the routing options offered by the broker you have chosen.

Choosing the Appropriate Route from the Available Options