Over the next few years the evolution of the stock market will change dramatically. We

can witness this with the rise of electronic trading. Electronic trading will be an efficient

way to trade because of its speed and precision.

Investors now have the ability to execute their own trades without having to rely on a

broker. The two main reasons why people trade electronically are speed of execution

and access to state-of-the-art execution systems. Speed is critical if you are trying to

trade because every second counts. Electronic orders are directly routed to the

NASDAQ without delay. Day Traders use electronic trading systems to get the best

possible fill. The state-of-the-art execution systems give Traders access to SOES

(Small Order Execution System), SelectNet, and ECN’s.

SOES is a market order execution route that was developed in 1987 after the stock

market crash because Market Makers refused to take orders. Therefore, in 1989 the

SECm andated SOES into existence, which forced the market maker to execute orders.

In the early 1990’s SOES represented as much as 80% of day Traders orders.

Today, with the rise of Electronic Communication Systems (ECN’s) the SOES execution

system represents about 10-20% of day Traders orders. What can ECN’s do for

Traders? An ECN can give Traders the ability to act like a virtual market maker. Simply

put, allows Traders to buy stock at the bid price and sell at the ask price (bypassing the

spread). This is a huge advantage over the investors trading on retail order entry

systems. ECN orders represent about 70% of day Traders’ orders.

And SelectNet, a limit order system, allows the order to placed between the bid and ask

price (narrowing the spread). SelectNet empowers the Trader with the ability to

preference Market Makers. Day Traders use SelectNet to execute trades about 10-20%

of the time. In summary, with the combination of speed and state-of-the-art execution

systems Traders can now have a great advantage at their finger tips.