|
 |
|
 |
|
|
 Printer friendly version
|
|
What happens to orders when brokers send them to the Primex Auction System?
By Glen Shipway, Primex Trading
Your broker just gave you an execution report for your order. The report says your order was executed in the Primex Auction System. You've never heard of this "Auction System." What is it?
Primex is a new electronic trading system that's based on the auction process used at traditional, floor-based exchanges.
Brokers send their customer orders to Primex to see if its auction process will generate better prices. Primex allows the auction process to be instantaneous, minimizing possible delays.
Orders that undergo instant auctions in Primex can receive improved prices because participants bidding on those orders often submit their interest in advance. This way, when the system auctions an order, it can immediately match with the best crowd interest available.
As an added feature, dealers sending in customer orders may guarantee executions in Primex using their own capital. This eliminates the need to seek liquidity in other market centers. For every execution in Primex, the price is based on crowd bids and is guaranteed to be at least as favorable as the best quote in the National Market System.
In the event an order does not execute in the system, the broker determines the next step. The order may be forwarded to another execution venue, such as an ECN or market maker. Alternatively, a broker may instruct Primex to forward the order automatically to another execution service
Brokers also can opt to conduct auctions with longer exposure times -- a maximum of 15 or 30 seconds -- to ensure the widest possible exposure in the system. In every case, auctions end as soon as Primex locates acceptable bids, perhaps even instantly.
Whether a broker acts as a market maker, an order-entry firm, or an ECN, the Primex Auction System can provide a quick and efficient way to seek better executions for your order.
Below, we have provided a few specific examples of orders and how they may be handled in Primex.
(For all the examples, the NBBO at the time of receipt is bid: 20 – ask: 20.05, bid size: 100 – ask size: 1,000.)
 |
|
MKT order to sell 1000 shares: |
|
| 1. |
|
With electronic crowd interest @ bid: Order will execute in Primex. 1000 @ 20. Execution report returned immediately. |
|
| 2. |
|
With electronic crowd interest @ bid + 2 cents: Order will execute in Primex. 1000 @ 20.02. Execution report returned immediately. |
|
| 3. |
|
With market maker guarantee: Order will execute in system at price determined by crowd. If no crowd interest, order executes @ bid. |
|
| 4. |
|
With no crowd interest and no guarantee: No execution in system. Order is returned instantly for routing to normal execution destination.
|
|
|
|
Limit order to sell 1000 shares @ 20: |
|
| 1. |
|
All scenarios apply as above.
|
|
|
|
Limit order to sell 1000 shares @ 20.01: |
|
| 1. |
|
With electronic crowd interest @ bid: Since the bid in the system (20) is less than the order's limit (20.01), order is returned (as if no crowd interest existed) for execution or posting as a limit order in broker's quote or ECN. |
|
| 2. |
|
With electronic crowd interest @ bid + 1 cent or higher: Order will execute at the improved price. Execution report is returned immediately. |
|
| 3. |
|
With market maker guarantee: Order will execute in system. Price determined by crowd. If no crowd interest, order executes @ limit. |
|
| 4. |
|
With no crowd interest and no guarantee: No execution. Order returned instantly for execution or posting as a limit order. |
|
|
|
Limit order to buy priced below best bid or limit order to sell priced higher than the best offer: |
|
| 1. |
|
Primex will not accept the order. |
|
|
|
|
