Storm Copestand
Traders Magazine Online News

Conquering Fear in Trading

In this exclusive to Traders Magazine, therapist Storm Copestand examines how traders can manage expectations and conquer their fear during the entire execution process.

Traders Poll

Amid changes in builder, do you think the CAT project will be completed by 2020?

Free Site Registration

September 1, 2010

The Retail King

By James Ramage

Also in this article

"I'm just an average guy," he said. "But I know that every person can make a difference. So, to the degree that I can make a difference in this market--make things fairer and better for everyone--that's what really drives me. It's a wonderful opportunity."

Don't be fooled. The "average guy" rolls up his sleeves and gets neck-deep in Ameritrade's routing strategy. To that end, Nagy and his order routing group pore over execution results and market conditions. They want to see evidence of price improvement. They want to know how speed factored into last week's best-execution results.

Chris Nagy, TD Ameritrade

In their best execution reviews, Ameritrade commonly compares its execution results with those of its competitors, said Gary Sjostedt, a director of order routing sales and strategy at Ameritrade. The group compares competitors' routing reports. They'll look at price-improvement levels and spikes, and graph those out.

The group also checks their route-away reports and limit executions. They'll peruse inquiries filed by their clients. They'll compare the public markets' numbers to gauge the impact of their clients' orders. They'll look at market opening protocols to see if their clients' orders were in any way disadvantaged in any particular names.

The routing strategy group also dials up the wholesalers and exchanges daily to discuss execution results. No issue is too minute to discuss, said Ovidio Montemayor, a director of trading services at Ameritrade.

"Every little issue, such as a delayed opening on the NYSE on a certain stock [is discussed]," Montemayor said. "We ask, 'How did that work out? What did you see at the close?' It's very thorough."

And they'll consider any industry news and recent regulations that may affect routing. In fact, regulations have had a tremendous impact on the retail business. The adoption of Rule 605 of Regulation NMS was the most significant. It requires market centers to publish monthly reports that detail execution-quality data. Brokers such as Ameritrade use these reports to compare execution quality across market centers when determining where to route.


Bifurcating Flow

Nagy was also instrumental in building what some consider the most complex order router at any retail broker. He led the routing group in developing the Ameritrade Order Management (AOM)--as the router is called--between 2001 and 2002. He also was the prime force behind adding many of the router's most powerful features after Ameritrade merged with online broker Datek in 2002.

To begin with, the order routing group Nagy heads endowed AOM with the ability to separate marketable and non-marketable order flow. Next, they added a feature that can separate market and limit order flow in equities, Nagy said. Later, the routing group gave AOM the capacity to handle good-till-cancel orders and immediate-or-cancel orders, and the ability to peg orders, as well as to pull orders back.