Direct Access Brokers
If you do not wish to use the services of traditional brokers and want to perform stock purchase / sale operations directly through the stock exchange or market maker, then you must open your own account with any of the online brokers, which will allow you to use one or several electronic communication networks. Traders typically download the appropriate software to their personal computers, which allows them to directly access the ECN using their Internet connections.
Traders using direct access brokers typically get real-time NADAQ Level quotes. At the same time, they can see on the screen of their computer the latest prices offered by buyers and sellers of shares, the value of the quota, the latest transaction and volume.
Direct access brokers also offer NADAQ Level I clients. NADAQ tariffs for Level I above than Level I. In addition, an additional fee for this type of access may be levied by the brokerage office.In addition to the information that you see on your computer screen in the case of Level I quotes, you also see the number of market makers that are bidding for each block of shares.
The NADAQ Level I quotes screen displays the best price offered by buyers and the best price offered by stock sellers for specific blocks of shares from market makers that participate in the bidding. All prices offered by buyers and sellers of stocks are ranked from best to worst. To display the full market depth for a specific stake, some of the direct access brokers combine the NADAQ Level I information and the data contained in the so-called “ECN book”. The ECN site has almost nothing to do with the usual sites that you see on the shelves of bookstores. It is a compilation of all trades, as well as quotes offered by buyers and sellers of shares and circulating in all electronic networks. Examples of screens with quotes NADAQ Level and Level I are shown in Chapter 14.
Traders can analyze the quotes and choose which of the market makers and which ECN to use to carry out a particular transaction.Most universal and discount brokers whose services you use will make this choice for you. Some of the discount brokers provide their customers access to ECN. with direct access brokers, you need to remember that the software you use may be on your own computer and not on your broker’s server, which significantly increases the speed of your stock purchase / sale operations. Some of the discount brokers provide their customers with software that allows them to receive basic data on their home computers, but this is a prog. . Software issues are discussed in detail in Chapter 4.
We often mention that you may miss the opportunity to buy or sell stocks at a reasonable price, especially when trading takes place in rapidly changing markets. Having direct access does not guaranteethat none of these opportunities will be missed, but the chances that you will be able to “catch” such prices are significantly increased, because in this case you will not have to wait until the pages with relevant information are downloaded from your broker’s server. Of course, so that you can take advantage of this, you need to have high-speed Internet access. Such types of access are DL or satellite communication channel.
Working with a direct access broker provides you with a steady stream of raw financial data. Software to support the purchase / sale of shares, downloaded to your computer, determines the specific way to organize this data and display it on the monitor of your computer. Providing better access is the difference between the services rendered by direct access brokers and the services of other brokers.
Software prices and access fees vary widely. The corresponding costs on your part can reach $ 300 per month. These costs can be compensated, especially if the volume of your trading operations is large enough. It is easy to see that using the services of a direct access broker is more efficient,from an economic point of view, than using the services of a discount broker, your trading should be regular. This statement remains valid even if some of the discount brokers offer limited direct access to their clients based on simpler software.
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