Marketable limits, directed venues, and spread filters

Queue priority at a single price

Speed, co-location, and earlier access to order flow through payment-for-order-flow arrangements are described as letting automated firms react first and occupy the front of a price queue. Queue priority is position at a single price. The back of that line receives fills after faster interest has already acted.

A human working a market-making style is described as typically sitting at the back of that queue and therefore unable to compete for first place at a given price.

Refuse the market-making queue

A resting limit is described as last in a queue that faster firms already dominate, so those firms can step ahead when the quote is favorable and lift the rest when the market moves adversely.

A limit order is a priced instruction that can rest behind other interest at a price, or become immediately executable when set at or through the displayed far side. The resting form is the seat left behind faster interest at the same price.

Extending the horizon from scalp-length intervals to minutes or hours is described as reducing competition from queue-dominant machines, while very short scalping is described as no longer viable.

Price a take that stays bounded

Taking liquidity is described with a marketable limit at the displayed far price, or one cent through it. A marketable limit is a limit set at the displayed far price, or one increment through it, so the order can take immediately while still bounding the fill.

An unpriced market order is treated as unbounded because the quote can move before the fill.

Filter the book before lifting

A liquidity filter restricts activity to books whose spread and depth keep the cost of taking inside the trade, and treats a suddenly tight far side as the executable print.

Mid-cap names are described as often showing five- or ten-cent spreads and smaller names wider still, while more liquid large-index names are described as often one or two cents. Thinner books are described as being avoided when taking liquidity.

When a name that usually spreads ten or twenty cents suddenly tightens to five cents, lifting the offer is presented as the better executable choice.

Choose a directed venue path

Liquidity is described as split across 13 public exchanges and more than 40 dark pools. That split is fragmented liquidity: the same name quoted across many public exchanges and dark pools, so the visible offer may live on a different venue than the first hop of a sequential router.

A sequential smart router that pings venues in a fixed order can signal the take so the intended offer is gone when the order arrives. That is why directed orders are presented as a path control. A directed order is an order addressed to a specific exchange rather than left to a default smart-router sequence.

Order routing here means sending an order along a chosen venue path instead of a fixed multi-venue sequence, so the first ping does not advertise a take to the quote still resting elsewhere.