Direct access routing and the visible book

The send button is a path

Online platforms of the period often accepted an electronic order and then sent it to a house desk, a broker's broker, or a wholesaler rather than posting it into the Nasdaq market. That path is online broker routing: the platform accepts the order, then a desk, a wholesaler, or another intermediary handles the fill.

Payment for order flow is described as selling or steering that routed order to an intermediary. That path is distinguished from unmediated access to the other side of the market.

Who reaches the other side

True electronic direct access is defined as sending the order into Nasdaq so that no desk works, touches, or sells the order flow. That path lets the trader bid, offer, or try to split the spread.

A direct-access stack combined an automated small-order path, a Nasdaq messaging path, and several electronic books so buying or selling interest could be represented in the market instead of handed to an intermediary. SOES is the automated small-order path used to hit or lift displayed Nasdaq size. SelectNet is the Nasdaq messaging path used to send orders to market makers and, in some setups, to reach other electronic books. An ECN is an electronic book that lets a trader post or hit prices directly instead of going through a market-maker desk.

Standing on the inside

A top-of-book quote shows only the inside bid and offer. A full montage, Level II, shows every participating dealer and electronic book, the size behind each price, and how often a participant has already been at the inside. The inside market is the highest displayed bid and the lowest displayed offer in a name at a given moment.

When several dealers stood on an 87 bid against an 87 1/16 offer, a montage user could join that bid instead of automatically lifting the offer.

Editorial: that join-or-take choice is a liquidity filter. Check displayed size, spread, and depth before you lift the offer.

Inside counts and the ax

A count of inside appearances was used as an order-flow filter: a dealer at the best bid 163 times and the best offer 34 times was treated as a net buyer that session. That running count is the number of best, how often a given participant has already been at the inside bid or inside offer.

The most active inside participant in a name was called the ax and is therefore watched as a short-horizon order-flow tell. A large dealer that was inside only 15 times on the bid and 10 times on the offer was still a net buyer but less useful than more active names for a short-horizon read.

What the open book stops showing

Completing a million-share buy in rising slices is presented as paying market-impact cost. The purchase itself lifts the average price, and a visible crowd bid can attract joiners that push the stock further.

A hidden matcher can cross a buyer's full price-size profile with a seller's discretion without showing the residual. That method is anonymous crossing. More volume in that channel makes displayed order flow harder to locate.

Editorial: once size is sliced into a rising bid or crossed away from the open book, Level II and the number of best still describe only what remains displayed. They do not restore the residual that has already left the montage.