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David Weisberger
Traders Magazine Online News

Stop the BS & Promote Real Transparency!

In this shared blog, David Weisberger says a recent WSJ article is wrong and that traders do need to purchase faster and more comprehensive market data to avoid being fined for violating "Best Execution" obligations.

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January 1, 2004

INET's Latest Deal

By Peter Chapman

With front-end systems like Lava and Sonic giving traders smart routing to multiple destinations, it no longer seems necessary for an ECN to offer outbound routing. Most still do though, so if an order fails to execute on the book, it gets sent elsewhere. INET has the technology (it's called SmartRouter) and believes it has found a way to keep it relevant.

Now, a sellside trader using a front-end with smart routing, may instruct the system to handle a trade automatically. The system surveys the market and sends the order to the execution spot most likely to fill it. The customer typically pays about 3/10ths of a cent per share to the ECN or SuperMontage.

INET's pitch to the sellside trader: Send all your orders to us and we will either fill them on our book or smart route them for you. If you execute on our book, you pay us 3/10ths of a cent. If we route away and you execute elsewhere, you pay us only 25/100ths of a cent. INET pays the other market center the 3/10ths of a cent.

INET head Alex Goor says he is happy to take the 5/100ths of a cent loss because the additional influx of orders can only benefit the book as a whole. In other words, the more liquidity the merrier.