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Figure 6.2 shows a direct access trade, which can be summarized as follows: |
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Step 1. You decide you want to buy 100 shares of XYZ. The quoted price that you see is 40 bid and 40 1/4 ask. These are the actual, live prices at this instant. |
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Step 2. You fill out the order window to buy 100 XYZ at 40 1/4 because you have real-time quotes and therefore you know where the best price is. You send the order electronically to the execution servers at your broker. |
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Step 3. In milliseconds, the execution servers check your order for a series of compliance and margin issues and instantly routes it to the correct exchange or ECN for the fastest possible execution. There is no time wasted with human intervention. |
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Step 4. Confirmation of the execution is sent electronically to your broker; and |
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Step 5. Confirmation is electronically sent to you. |
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Step 6. You pay your broker a commission. The broker has no conflict from being paid by a trading firm, too. |
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This process can take from under one second to just a few seconds. However, no system is immune to an overcrowded market. At such times (like the "open" each morning), it can take several minutes. |
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The direct access process is efficient, fast, and results in consistently better price execution. That equals more money in your pocket. |
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Figure 6.2
Direct Access Trade Process |
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