In some cases, these dark pools allow outsiders entry to increase their order flow.
This is called payment for order flow, and trader-blogger Jeffrey Carter explains the problem.
Both exchanges compete for the order flow that leads to reduced costs, market efficiency and innovation.
Then it may take sales traders a lot of work to recover that order flow.
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If the character of the order flow changes, the outgoing order monitoring device should immediately cut off the orders.
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More financial dealings are being done on exchanges and on Internet platforms, where the order flow instantly becomes public information.
These order flow monitoring devices should be completely independent of the computerized systems that traders use to generate their orders.
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They still sell order flow, but the price for order flow has dropped by more than 50% in the last year.
The brokers use the waterfall to keep track of the order flow.
The NYSE promotes these in-house sites as the way to get order flow before firms located away from the exchange property itself.
Each electronic trader should install a computerized system to watch its outgoing order flow to ensure that it is consistent with its business model.
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Not surprisingly, the established exchanges would like to ban payment for order flow, or at least make sure the customers know what is going on.
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They should examine rate of flow, average time between orders, balance between buy and sell orders, and order sizes, to determine whether the order flow has become anomalous.
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Operations people, such as the CTO for electronic equity order flow or the operations director for fixed income, equities or market data, will want to monitor systems in real-time.
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But certainly one big topic of conversation has been soft dollars--the monetary value of the research that investment banks provide to clients in return for trading order flow--which the SEC has been studying.
The smarter players take advantage of this information, sometimes acting ahead of the traditional technical signals in the direction of the predicted signals and then exiting in the order flow generated by the technical signal.
But though he is tainted with the Grasso scandal and is the subject of litigation himself, Langone is getting a hearing from the firms that make up much of the daily order flow at the exchange.
But though he is tainted with the Grasso scandal and is the subject of litigation himself, Langone is getting at least an ear the firms that make up much of the daily order flow at the exchange.
Mergers between stalwarts NYSE and Nasdaq Stock Market and electronic exchanges Archipelago and Inet last year threatened extinction for the nation's regional stock exchanges, which have struggled to attract trade order flow with the boom in electronic trading.
Knight Capital, the Jersey City-based trading firm that nearly collapsed over the summer due to a trading blunder, told clients it was having power issues and instructed them to route order flow away from Knight, according to Reuters.
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During the day, they wanted to watch how the top ten of those 500 were performing, was the order flow normal, was it normal across all the markets they traded in, and was it normal for the time of day.
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Last year, Citadel, Merrill Lynch, UBS, Credit Suisse Group, Citigroup and Morgan Stanley collectively bought up more than 80% of the Philadelphia Stock Exchange and are plowing resources into its electronic trading systems with a goal to route more stock order flow through it.
Mergers between stalwarts NYSE and Nasdaq Stock Market (nasdaq: NDAQ - news - people ) and electronic exchanges Archipelago and Inet last year threatened extinction for the nation's regional stock exchanges, which have struggled to attract trade order flow with the boom in electronic trading.
The main difference being that the more traditional model, featuring pro-rata allocation and collection of payment for order flow, is more geared towards one facet of the investing community, comprised in large part by retail investors who are using options limit orders and other very simple strategies.
"The concern is if enough volume and order flow gets diverted into dark markets, at some point we would ask whether you would have reached a tipping point at which the public price discovery from displayed markets is being hurt, " said Jamie Brigagliano, co-director of the SEC's trading and markets division.
But the standby router picked the wrong configuration file, which caused a drop in order flow, something the business users saw immediately with ITRS. Banks want to catch that sort of thing right away because their customers are monitoring execution and will divert their trades quickly if they see a problem.
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Last year, Citadel, Merrill Lynch (nyse: MER - news - people ), UBS (nyse: UBS - news - people ), Credit Suisse Group (nyse: CSR - news - people ), Citigroup (nyse: C - news - people ) and Morgan Stanley (nyse: MS - news - people ) collectively bought up more than 80% of the Philadelphia Stock Exchange and are plowing resources into its electronic trading systems with a goal to route more stock order flow through it.
Many believe capital deployment should follow a "pecking-order theory" that prescribes that managements should apply their cash flow, in order of priority, to fix their balance sheet if overleveraged, fund organic investments, pay dividends, fund acquisitive growth and, only when there is additional cash left over, to distribute it via share repurchases.
Judging from recent visits it is possible that basic automatic reorders have been stopped in order to preserve cash flow.
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