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RobertBu wrote:
> Within the context of the SOES system I used last year, an ECN was
> an method of placing my shares up for sale. There were about eight
> of them. The two I remember were ISLAND and BLOOMBERG.
There are 7 of them at present, with most of the volume being handled by Island,
Archipelago, and Bloomberg, in that order.
> There are a couple of problems with using many of the ECNs. The
> first is that if you received a partial fill, the rest of the order was
> canceled and you had to resubmit the order.
Not familiar with any ECN that does this. If you receive a partial fill, the
remainder of the order stays open until it is filled, canceled, or it expires.
> For example, imagine
> a fairly volatile market and you place your shares up for sale with
> an ECN timing the move perfectly only to have 100 of your 1000
> taken and now be holding 900 shares as the market moves against
> you. By the time you get out of the remaining 900 shares you might
> have lost a point or more.
Well, this can happen with limit orders generally, and there isn't anything
peculiar to ECN's that would add risk. If you timed the move "perfectly," you
would have sold the 1000 of course. ECN's also allow a fairly quick C/R
turnaround - a matter of a couple of seconds, rather than say the time it takes
with online brokers.
> The second problem is that you tip your
> hand and may actually slow or stop the momentum of the move you
> are depending on to get out of your position.
If you make the market - i.e. go high offer or low bid, then you are "tipping
your hand" in this sense, but this doesn't mean much anyway. Without ECN
access, though, you can't even do this, and have to wait until a MM fills you.
> An alternate is INSTANET in which you can bid or offer directly to
> all the market makers or any particular market maker. It has its
> own set of problems, but can be very useful.
ECN's do this too - ARCA even automatically preferences according to fill
statistics.
Regards,
A.J.
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