Q&A by Don Bright
SUBPENNIES AND HIGH-FREQUENCY TRADING
Don, I read your recent column about subpennies and high-frequency trading (S&C, March 2010). How have you and your traders adapted your order routing in the last few months?
Good question. For the longest time we would advise our traders to “park” on an electronic communications network (Ecn) to collect rebates when they were waiting to be hit on a bid or offer. We would advise them to hit bids or take out offers on the primary exchange (Nyse, for example), since it was cheaper overall. Currently, we feel that it makes sense to do the latter most of the time since we are finding that when we park, we are getting fewer fills due to the high-frequency trading (Hft) orders getting placed in front of our orders. Hopefully, the regulators will work with liquidity providers to fix some of this.