You send your order to the Nasdaq mainframe, which puts your order in a queue.
Orders are processed in the order received, with market orders receiving precedence over limit orders. Limit orders must be priced at, or better than, the inside market.
Market orders remain in the queue until cancelled or executed. Limit orders remain in the queue until the limit price is breached or until the order is canceled or executed. If shares are available when your order reaches the top of the queue, it will be executed.
2. SelectNet Broadcast. This is another Nasdaq execution method that automates the negotiation and execution of trades. In a SelectNet Broadcast order:
You send your bid or offer to the Nasdaq system.
It is displayed to every market maker and ECN in that particular stock.
You may not cancel your bid or offer for ten seconds.
Any of those market makers or ECNs may choose to execute your bid or offer.
If your bid or offer is not executed within a specified time (3 to 99 minutes) it is terminated by Nasdaq.
3. SelectNet Preference. This is the third Nasdaq execution method. It has the same characteristics as the SelectNet Broadcast method except that you direct your bid or offer to one or more "preferenced" market makers or ECNs. You would use the Preference method when your experience tells you that the particular market maker or ECN you choose is highly likely to have the liquidity to execute against you. We always seem to come back to liquidity!
4. ECN Direct. This execution method does not go through Nasdaq, but it requires that your broker have direct access to the ECNs with whom you would like to trade. If your broker has that capability, you simply send your bid or offer directly to the ECN computer of your choice. Your order either will be matched against a corresponding order or held in the limit order book until executed or cancelled.
Is this starting to sound complicated? Well, we wanted you to feel like this is quite difficult because it can be.
To tell the real truth, we could have written fifty more pages about the nuances of placing orders on Nasdaq stocks. A considerable amount
