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Copyright 2004 PD,LLC

June 2004

Trade Routes

By Richard Philip Cadway
This Newsletter is not a public release - for members only
Trade Routes! For beginners out there, a trade route is simply a computer network that is used to execute a trade on an ECN (electronic communication network) or an exchange. Trade routes evolve over time making an occasional review a good idea.
 
Types You can execute a trade on the NASDAQ using direct access or by being routed through a market maker. Trades on the NYSE are executed by the specialist for that stock and are routed electronically to that specialist by various firms.
 
ECN's Electronic Communication Networks, can bring buyer and seller together to execute a trade or the ECN can pass your order to an exchange. The most used ECN back in the late nineties and early 2000's was "Island". There were many other popular ECN's as well such as ARCA, REDI, and BRUT as you can see in the 2001 chart to the right listed under the heading "name".
 
For various reasons some ECN's have either merged with other ECN's or have changed into an exchange. Most ECN's charge a fee per share for trades that are executed through their ECN. Some ECN's charge a fraction of a penny per share if you take away liquidity and pay you a fraction of a penny per share if you add liquidity.
The following is a partial list of trade routes or ECN's that have merged or changed their status:

ECN

WAS

IS NOW
Island

ISLD

INET
Archipelago

ARCA

ARCAX
ARCA OTCBB

ARCAB

ACRAB
BRUT and REDI

BRUT

BB
 
Different brokerage firms offer different trade routes. Usually the trade routes they offer are the trade routes that their associate execution firms or market makers offer. Therefore, it is important that you, as a trader, ask your broker what trade routes are offered and how you can learn the cost and benefits of each. In the 2004 order entry picture to the right notice the various trade routes offered by RML Trading. INET is now the symbol that has replaced ISLD as you can see above. ARCA is still ARCA, but it is now an exchange and can also have the symbol ARCAX.
 
It is important to learn all the ECN symbols, so that you can differentiate them from the market makers symbols in the level 2 screen. A useful site for valuable information is offered by NASDAQ at http://www.nasdaqtrader.com


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THE ARCHIVE - previous newsletters from 2000 to 2002

Princeton's Precision Trading

Jan-2003

Time and Sales

Feb-2003

Discipline

June-2003

Selling Short

October-2003

Do The Opposite

December-2003

Trade Routes

June 2004

 Training Programs

 

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