Direct access, intelligent order routing, and visible book depth

From broker handoff to electronic destinations

First-generation online brokerage forwarded an entered order to a broker, who then sent it to a Nasdaq market maker or an exchange. The entered order left the trader's screen, but the destination was still chosen downstream.

Second-generation electronic brokerage connected the trader electronically to market makers, electronic communication networks, and exchange specialists as destinations for over-the-counter or listed execution. Those names were no longer only background labels. They were places an order could be sent.

Order routing as a destination choice

Order routing means choosing which venue or counterparty receives an order so that available price, size, and speed are considered together.

Intelligent order routing hunted among counterparties for the best available bid or ask at that moment and selected a destination for speed and execution quality.

A trader could pick a counterparty and send the order electronically, or let routing search for the counterpart offering the desired price and volume.

When a market order should hunt

A market order seeks immediate execution at the best available bid or offer rather than resting at a specified price. That still leaves a destination question: who is asked to fill it.

Nasdaq execution paths included Small Order Execution System and SelectNet, while the New York Stock Exchange used SuperDot, which in turn linked to the intermarket trading system.

Editorial: a market order handed to one broker is not the same action as a market order allowed to hunt among those paths for the best available bid or offer.

Inspect more than the inside quote

A liquidity filter uses visible book depth, venue access, and available size to decide whether a destination can actually fill the intended trade.

Streaming Level II showed the inside market, and depth-of-book displays, where a network allowed it, showed all buy and sell orders in that electronic communication network rather than only the best bid and ask. The inside quote is the top of the book. It is not the whole book.

The same routing idea without the full toolkit

An easier direct-access platform was launched so less-active traders could use intelligent order routing without the full high-end toolkit. Destination choice was not reserved for the most elaborate screen.

A later product plan folded real-time charting, Level II data, and options trading into a simpler platform while leaving more advanced decision-support tools on the high-end system.